Appeal by defendants from Judgment entered 13 October 2005 and
order entered 23 March 2006 by Judge W. Russell Duke, Jr., in
Onslow County Superior Court. Heard in the Court of Appeals 21
Robert W. Detwiler for plaintiff-appellee.
Smith Moore LLP, by Sidney S. Eagles, Jr., for defendants-
Defendants appeal from judgment entered 13 October 2005
granting compensatory and punitive damages to plaintiff upon the
jury verdict in an action for fraud, an order entered 23 March 2006
denying defendants' motion for a new trial pursuant to Rule 59 of
the North Carolina Rules of Civil Procedure. For the reasons that
follow, we affirm.
On 10 September 2001, plaintiff purchased a vehicle,
represented as a 1993 Saturn with 77,024 miles on the odometer,
from East Coast Imports. East Coast Imports, located at 6315 Gum
Branch Road, Jacksonville, North Carolina, was a licensed car
dealer, primarily purchasing and repairing salvaged vehicles for
resale to the public.
The business known as East Coast Imports was originally
started by defendant Warren Royster in the 1980s as Warren Royster
& Sons, Inc. d/b/a East Coast Imports. Sometime around 1993, the
business went bankrupt as the result of a fire and the assets were
transferred to defendant Barbara Jackson, defendant Warren
Royster's mother, as East Coast Imports, a sole proprietorship.
Defendant Brenda McClain, defendant Warren Royster's ex-wife,
worked as the secretary for the business.
On 26 February 2002, Inspector Andrew C. Heath of the North
Carolina Division of Motor Vehicles, License and Theft Bureau,
conducted a routine business inspection of East Coast Imports.
Inspector Heath noticed three vehicle shells each of which had been
stripped of its odometer, dashboard plate bearing the Vehicle
Identification Number (VIN), and driver's side door containing the
federally mandated identifying decal. Inspector Heath then located
the confidential VIN for each vehicle.
(See footnote 1)
The confidential VINs
revealed that the three vehicles in question were a 1996 ChryslerLHS, a 1995 Dodge Neon and a 1993 Saturn SLI., titled to East Coast
Imports, Kevin Klink, and plaintiff, respectively.
An investigation revealed that a 1994 Chrysler bearing the VIN
of the 1996 Chrysler LHS was being driven by someone at the
dealership. The Dodge Neon which was purchased from East Coast
Imports by Kevin Klink was repossessed by Warren Royster against
the advice of Inspector Heath, stored in a undisclosed location,
and therefore not available for examination in conjunction with the
The investigation further revealed that the car which had been
purchased by plaintiff as a 1993 Saturn with 77,024 miles was
actually a 1992 Saturn with 226,945 miles. The 1992 Saturn had
previously been purchased by East Coast Imports from an auto
auction in Maryland as a parts-only vehicle, which Inspector Heath
testified was not fit for operation on the highway and could
legally only be stripped for parts or resold to a salvage yard or
other dealer. Inspector Heath testified that the dashboard VIN
plate, driver's side door with the federal decal, and odometer
which had been removed from the 1993 Saturn were found in the 1992
Saturn purchased by plaintiff; those 1993 identifiers had been
painstakingly installed into the 1992 Saturn in such a manner as to
appear to be original.
There were two Bills of Sale for plaintiff's Saturn: one
showing that she had purchased a 1993 Saturn from Brenda McClain on
behalf of East Coast Imports on 10 July 2001 for $1,911 and a
second Bill of Sale that was sent to the Department of MotorVehicles in Raleigh showed that plaintiff purchased a 1993 Saturn
from Warren Royster on behalf of East Coast Imports on 21 September
2001 for $1,090. On the second Bill of Sale it appeared that
plaintiff's signature had been misspelled, and plaintiff testified
that she had never seen the second Bill of Sale until this lawsuit.
Inspector Heath identified the Certified North Carolina Title
History for the 1993 Saturn which indicated that defendant Barbara
Jackson had applied for a bonded title for the 1993 Saturn on 18
July 2001. Defendant Barbara Jackson furnished an affidavit
showing East Coast Imports had purchased the 1993 Saturn on 25
October 2000 from an auto auction in Maryland, but the invoice from
the auction showed it was actually purchased on 25 November 1998.
The certified title history also indicated that defendant Barbara
Jackson was issued a title to the 1993 Saturn on 12 September 2001,
signing it over to plaintiff on 21 September 2001 with a mileage
certificate of 77,024 miles and no disclosure of the salvage
history or the parts-only designation of the 1992 Saturn which
plaintiff actually received. Because the 1992 Saturn was not fit
for operation on the highway and had been titled in violation of
state law, it was seized from plaintiff and permanently impounded.
On 23 August 2002, as a result of Inspector Heath's
investigation of the three cars with altered VINs, an order was
entered revoking the motor vehicle dealer's license of East Coast
Imports. Defendants continued to sell automobiles with
questionable titles even after the revocation of their motor
vehicle dealer's license. Evidence adduced at trial showed that on03 December 2002, defendant Kevin Royster, on behalf of East Coast
Imports, affirmatively denied the salvage title history of a 1996
Saab when he sold the car to defendants' trial counsel.
Sometime after the revocation of the motor vehicle dealer's
license of East Coast Imports, the Royster family created a new
North Carolina corporation, E. Coast Imports, Inc., d/b/a East
Coast Imports. The new corporation obtained a motor vehicle
dealer's license on 24 July 2004. Warren Royster owned 40% of the
stock of E. Coast Imports, Inc. and Kevin Royster, Robert Royster
and Jessica Royster, Robert Royster's wife, all held 20% each.
Jessica Royster later divorced Robert Royster, and her interest was
acquired by Brenda McClain, Warren Royster's ex-wife. The
inventory of East Coast Imports was transferred to E. Coast
Imports, Inc., and the business continued selling automobiles.
On 4 May 2004 plaintiff filed a complaint against Warren
Royster, Barbara Jackson, Kellum [Kevin] Royster and Brenda J.
McClain, all d/b/a East Coast Imports, alleging actual fraud and
unfair and deceptive trade practices. Each defendant filed an
answer, along with a Rule 12(b)(6) motion to dismiss the complaint,
on 7 July 2004. The record does not contain any orders related to
the Rule 12(b)(6) motions.
From 10 to 13 October 2005, this action was tried before a
jury in Superior Court, Onslow County. On 13 October 2005, the
jury returned a verdict for plaintiff on the fraud claim in the
amount of $1,911 in compensatory damages and $500,000 in punitive
damages, which was reduced to $250,000 pursuant to N.C. Gen. Stat.§ 1D-25, and the trial court entered judgment thereon. On 24
October 2005, defendants filed a motion pursuant to Rule 59 of the
N.C. Rules of Civil Procedure for a new trial. On 3 November 2005,
plaintiff filed a Motion for Specific Findings of Fact pursuant to
Rule 52 of the North Carolina Rules of Civil Procedure. On or
about 23 March 2006 defendants' motion for a new trial came on for
hearing before Judge W. Russell Duke, Jr. From the evidence
presented at trial and arguments of counsel upon the defendants'
motion for a new trial, the trial court made its findings of fact,
conclusions of law and entered an order on 23 March 2006 denying
defendants' motion for a new trial. Defendants appeal.
Defendants contend the trial court erred by denying their
motion for a new trial. They contend the trial court's findings of
fact in the order denying the motion for new trial were not
supported by the evidence. They further contend that the amount
awarded for punitive damages violated defendants' constitutional
right to due process. Lastly, they argue the trial court erred by
not awarding a new trial to defendant Kevin Royster, on the basis
that there was insufficient evidence at trial to support the jury
verdict that defendant Kevin Royster committed fraud against
Plaintiff responds that defendants' argument regarding the
constitutionality of the punitive damage award is untimely and
should not be considered on appeal. Alternatively, they argue that
even if this Court considers the constitutionality of the punitivedamages award, the amount is within the bounds of due process.
Further, they argue that the trial court did not abuse its
discretion in denying defendants' Rule 59 motion for new trial for
all defendants, because the trial court's findings of fact were
supported by competent evidence and the findings of fact supported
the trial court's conclusion that there was no justification for
granting a new trial. Finally they contend that the evidence was
sufficient to support the verdict, therefore the trial court did
not err in failing to grant defendant Kevin Royster a new trial.
Plaintiff also makes a cross-assignment of error claiming the trial
court erred in denying their motion for a directed verdict at the
close of defendants' evidence.
III. Standard of Review
Though defendants' notice of appeal references both the
underlying judgment and order denying their motion for a new trial,
all of their assignments of error are based on the trial court's
denial of their motion for a new trial. We will therefore review
only the order denying defendants' motion for a new trial, and
determine the standard of review accordingly. N.C.R. App. P. Rule
10(a) (The scope of review on appeal is confined to a
consideration of those assignments of error set out in the record
Defendants concede that denial of a Rule 59 motion is
generally reviewed only for abuse of discretion. They contend
however, that where the [Rule 59] motion involves a question of
law or legal inference [this Court's] standard of review is denovo
. Kinsey v. Spann
, 139 N.C. App. 370, 372, 533 S.E.2d 487,
490 (2000). Additionally, they contend that [t]his Court has
recognized that '[a]ppellate courts should apply a de novo
of review in deciding whether a punitive damages award is
unconstitutionally excessive.' Appellants Brief at 15 (quoting
Rhyne v. K-Mart Corp.
, 149 N.C. App. 672, 698, 562 S.E.2d 82, 99-
100 (2002) (Greene, J., dissenting) (citing Cooper Indus. v.
Leatherman Tool Group
, 532 U.S. 424, 431, 149 L. Ed. 2d 674, 686-87
We note initially that the above-quoted language is from Judge
Greene's dissent, and not from the opinion of this Court, an
opinion which was subsequently affirmed by the North Carolina
Supreme Court. Rhyne v. K-Mart Corp.
, 358 N.C. 160, 190, 594
S.E.2d 1, 21 (2004). Furthermore, Cooper Indus. v. Leatherman Tool
, the case cited by Judge Greene's dissent, expressly stated
that courts of appeals should apply a de novo
standard of review
when passing on [trial] courts' determinations
constitutionality of punitive damages awards. 532 U.S. 424, 436,
149 L. Ed. 2d 674, 687 (emphasis added).
However, a constitutional question which has not been raised
and determined in the trial court will not be considered on appeal.
State v. Elam
, 302 N.C. 157, 159, 273 S.E.2d 661, 663 (1981)
(citing cases from both the North Carolina Supreme Court and the
United States Supreme Court); Rhyne
, 149 N.C. App. at 690, 562
S.E.2d at 95 (It is a long-standing rule that a party in a civil
case may not raise an issue on appeal that was not raised at thetrial level.); Kaplan v. Prolife Action League of Greensboro
N.C. App. 1, 31, 431 S.E.2d 828, 844 (declining to consider a
constitutional argument which was not raised at the trial court),
disc. review denied and appeal dismissed
, 335 N.C. 175, 436 S.E.2d
379 (1993); accord Browning-Ferris v. Kelco Disposal
, 492 U.S.
257, 276-79, 106 L. Ed. 2d 219, 239-41 (1989) (declining to review
a punitive damages award for due process violation when that
argument was not raised below and instead applying abuse of
discretion review pursuant to denial of a Rule 59 motion).
Defendants did not raise the constitutionality of the punitive
damages award to the trial court, so we will not review this issue,
As to the issues that were raised to and determined by the
trial court, defendants' contention that Kinsey
entitles them to de
review is similarly misplaced. According to Rule 59, [a] new
trial may be granted for the reasons enumerated in the Rule.
(See footnote 2)
Byusing the word may, Rule 59 expressly grants the trial court the
discretion to determine whether a new trial should be granted.
Generally, therefore, the trial court's decision on a motion for a
new trial under Rule 59 will not be disturbed on appeal, absent
abuse of discretion. Mumford v. Hutton & Bourbonnais Co.
, 47 N.C.
App. 440, 445, 267 S.E.2d 511, 514 (1980). Kinsey
narrow exception to the general rule, applying a de novo
of review to a motion for a new trial pursuant to Rule 59(a)(8),
which is an [e]rror in law occurring at the trial and objected to
by the party making the motion[.] 139 N.C. App. at 373, 533
S.E.2d at 490.
However, where as here, the defendants move for a new trial
pursuant to only Rule 59(a)(5), (6), and (7), it is plain that a
trial judge's discretionary
order pursuant to G.S. 1A-1, Rule 59
for or against a new trial . . . may be reversed on appeal only in
those exceptional cases where an abuse of discretion is clearlyshown. Worthington v. Bynum
, 305 N.C. 478, 484, 290 S.E.2d 599,
603 (1982) (emphasis in original) (applying abuse of discretion
standard when only Rule 59(a)(5), (6), and (7) were raised to the
trial court as grounds for a new trial). Abuse of discretion
results where the [trial] court's ruling is manifestly unsupported
by reason or is so arbitrary that it could not have been the result
of a reasoned decision. State v. Hennis
, 323 N.C. 279, 285, 372
S.E.2d 523, 527 (1988)).
IV. Punitive Damages
Defendants' contended in their motion for new trial that the
jury manifestly disregarded the instructions of the court,
specifically N.C.P.I. -- Civil 810.98, when it awarded punitive
damages to plaintiff. N.C. Gen. Stat. § 1A-1, Rule 59(a)(5).
Alternatively, defendants argued that the jury awarded excessive
punitive damages under the influence of passion or prejudice. N.C.
Gen. Stat. § 1A-1, Rule 59(a)(6).
In its order entered 23 March 2006, the trial court concluded
that: (1) the verdict was amply supported by the evidence, and (2)
defendants failed to provide evidence of any misconduct by the
jury. Accordingly, it denied defendants' motion for a new trial.
The trial court had instructed the jury on punitive damages
using N.C.P.I. -- Civil 810.98, as follows:
Are the Defendants liable to the Plaintiff for
You are to answer this issue only if you have
awarded the Plaintiff relief [for the
. . . .
What amount of punitive damages, if any, does
the jury in its discretion award to the
Plaintiff? You are to answer this issue only
if you've answered the [previous] issue, yes,
in favor of the Plaintiff. Whether to award
punitive damages is a matter within the sound
discretion of the jury. Punitive damages are
not awarded for the purpose of compensating
the plaintiff for her damage, nor are they
awarded as a matter of right.
If you decide, in your discretion, to award
punitive damages, any amount you award must
bear a rational relationship to the sum
reasonably needed to punish the Defendants for
egregiously wrongful acts and to deter the
Defendants and others from committing similar
wrongful acts. In making this determination,
you may consider only that evidence which
relates to the reprehensibility of the
Defendants' motives and conduct, the
likelihood, at the relevant time, of serious
harm to the Plaintiff or others similarly
situated, the degree of the Defendants'
awareness of the probable consequences of
their conduct, the duration of the Defendants'
conduct, the actual damages suffered by the
Plaintiff, any concealment by the Defendants
of the facts or consequences of his conduct,
the existence and frequency of any similar
past conduct by the Defendants, whether the
Defendants profited by the conduct, the
Defendants' ability to pay punitive damages,
as evidenced by his revenues or net worth.
Finally, if you determine, in your discretion,
to award punitive damages, then you may award
to the Plaintiff an amount which bears a
rational relationship to the sum reasonably
needed to punish the Defendants for
egregiously wrongful acts and to deter the
Defendants and others from committing similar
wrongful acts. That amount should be written
in the space provided on the verdict sheet.
If, on the other hand, you determine, in your
discretion not to award the Plaintiff any
amount, then you should write the word, none,
in the space provided on the verdict sheet. When the trial court denied defendants's motion for a new
trial, it found facts, all supported by evidence adduced at trial,
in support of its conclusion that the jury's punitive damages
verdict was amply supported by the evidence. The facts found by
the trial court may be succinctly summarized as follows: (1)
defendants sold plaintiff a car that was unfit for operation, in
violation of state law; (2) considerable efforts were expended to
conceal facts of similar conduct by defendants; (3) defendants were
well-aware that they were selling unfit vehicles; (4) defendants
deliberately concealed information concerning their net worth; and
(5) defendants, undaunted by the revocation of their motor vehicle
dealers' license, reformed their business as a different corporate
entity and continued to sell cars. These findings all support an
award of punitive damages under the jury instructions as given,
relating to the reprehensibility of defendants' motives and
conduct, the degree of the defendants' awareness of the probable
consequences of their conduct, the duration of defendants' conduct,
the concealment by defendants of the conduct, the existence and
frequency of similar past conduct by defendants, and that
defendants profited from the conduct.
On these facts, we hold that the trial court's conclusion that
the jury's verdict on punitive damages was supported by the
evidence that they were instructed to consider was neither
arbitrary nor manifestly unsupported by reason. Accordingly, the
trial court did not abuse its discretion when it denied defendants'
motion for a new trial on that ground. In their Rule 59 motion, defendants argued, in the
alternative, that the jury verdict for punitive damages was
rendered under the influence of passion and prejudice. Defendants
supported this argument with three assertions: (1) a potential
juror was dismissed because he admitted to being incapable of
objectivity, (2) plaintiff's closing argument stated that the jury
had the ability to close defendants' business, and (3) the jury
returned a verdict after deliberating for less than 20 minutes.
Neither jury selection nor closing arguments appear in the
record or the transcripts, so we are not able to consider them on
appeal. N.C.R. App. P. 9(a). Defendants remaining assertion, that
the jury concluded its deliberations quickly, is hardly evidence of
passion and prejudice per se
, and even defendants' Rule 59 motion
states only that a short period of deliberation giv[es] rise to at
least the perception of being influenced by passion and prejudice.
In sum, defendants offered the trial court no facts which support
their argument that the jury acted with passion and prejudice.
Accordingly, the trial court did not abuse its discretion when it
concluded that there was no evidence of jury misconduct, and denied
defendants' motion for a new trial on that ground.
V. Kevin Royster
Defendants next contend the trial court erred in denying its
motion for a new trial as to defendant Kevin Royster, because there
was no evidence that defendant Kevin Royster participated in the
transaction complained of by plaintiff and no evidence that
defendant Kevin Royster committed fraud against plaintiff. At trial, the jury was instructed to answer the question:
Was the Plaintiff, Stacey N. Greene, damaged by the fraud of the
Defendants? The jury was then correctly instructed on the
essential elements of fraud: (1) defendant made a false
representation of a material fact, (2) calculated to deceive, (3)
which was made with intent to deceive, (4) does in fact deceive,
(5) was reasonably relied on by the plaintiff, and (6) resulted in
injury to the plaintiff. See
N.C.P.I. -- Civil 800.00 (2004).
Defendant Kevin Royster did not object to the jury instructions on
fraud when given opportunity by the trial court. He also did not
object to the issue as it was stated to the jury and did not
request that a separate issue be submitted regarding his actions
only. The jury unanimously answered yes to the question of fraud.
In its order denying the Rule 59 motion, the trial court made
findings of fact, all supported by evidence adduced at trial, which
may be succinctly summarized as follows: (1) defendants
intentionally changed the VIN on a 1992 Saturn in a deliberate
effort to contravene the law and to conceal the fact that the
vehicle was unfit for operation; (2) plaintiff purchased the
vehicle in reliance on defendants' representation that it was a
road-worthy 1993 Saturn; and (3) the State of North Carolina
impounded the vehicle, leaving plaintiff without the use of her
automobile for more than three years. On these facts, we conclude
that the jury's verdict was amply supported by the evidence, and we
hold that the trial court did not abuse its discretion when itdenied defendants' motion for a new trial for defendant Kevin
VI. Plaintiff's Cross Assignment of Error
Plaintiff cross-assigned error to the denial of her motion for
directed verdict. However, because the judgment of the Superior
Court in [plaintiff's] favor remains undisturbed, plaintiff is not
an aggrieved party within the meaning of N.C. Gen. Stat. § 1-271.
Teague v. Duke Power Co.
, 258 N.C. 759, 765, 129 S.E.2d 507, 512
(1963); N.C. Gen. Stat. § 1-271 (2005). Accordingly, plaintiff's
cross-assignment of error is dismissed.
For the foregoing reasons, we conclude the trial court did not
abuse its discretion when it entered an order denying defendants'
Rule 59 motion for a new trial. Accordingly, that order is
affirmed, and the 13 October 2005 judgment of the trial court
Judges McCULLOUGH and CALABRIA concur.