Court: Court of Appeals of Georgia; December 1, 1986; Georgia; State Appellate Court
Bill and Merlene Kirkland, operating as Kirby Sales Service, sold vacuum cleaners on credit, primarily financed by Southern Discount Company, led by president Doug Lucas. Under a Master Dealer Agreement, Southern retained 5% of any unpaid balances from notes purchased from the Kirklands, which was allocated to a Dealer's Reserve Fund to cover defaults. The agreement stipulated that the Kirklands would repurchase any defaulted contracts without impacting the reserve account, while any unrepurchased defaults would be charged to it. Over two years, the Kirklands financed roughly 300 sales, with significant defaults occurring in 1979 and early 1980 before halting business in June 1980.
The Kirklands filed a four-count complaint against Southern Discount Company. Count I alleged Lucas maliciously demanded payment for contracts that were fully paid. Count II claimed Southern fraudulently misrepresented that two specific contracts were in default, prompting unwarranted payment demands. Count III accused Southern of unlawfully repossessing vacuum cleaners from Kirkland’s customers, despite the Kirklands having settled the relevant debts. Count IV detailed multiple instances of Southern's wrongful actions, including double charging for a contract and falsely claiming repossessions, resulting in damages of $16,792.24 to the Kirklands due to Southern's conduct.
Lucas accepted funds from the Kirklands with the representation that half would be applied to a specific contract and the other half to a separate defaulted contract, which he never credited as promised. These actions were alleged to be fraudulent with the intent to deceive the Kirklands. The legal standard requires separate counts for distinct claims to ensure clarity, as outlined in OCGA 9-11-10 (b). Count IV presented multiple unrelated claims, complicating the trial and appellate review. The plaintiffs sought $1,000,000 in actual damages and $500,000 in punitive damages. The jury awarded damages for breach of contract ($10,000), fraud ($20,000), conversion ($20,000), and punitive damages ($125,000).
Defendants appealed, arguing that the trial court erred by not granting their directed verdict motion concerning Count IV. The court faced issues as there was no jury decision on specific counts, only general topics. One allegation in Count IV claimed damages of $16,792.24 due to Lucas returning contracts marked as paid, which could mislead regarding the plaintiffs' recourse options. The court noted that such markings are only prima facie evidence of payment, which can be disputed.
Additionally, the defendants argued that the trial court erred by not granting a directed verdict for breach of contract. The court agreed, noting that exemplary damages cannot be awarded for breach of contract, following established precedents. The plaintiffs did not clearly allege breach of contract or specify damages related to it, and the jury instructions were not sufficiently detailed regarding what constituted a breach in this case, especially given the involvement of over 300 contracts.
Arguments were made regarding the defendants' breach of the Master Dealer contract by withholding more than the allowed 5 percent. If this breach is accepted, damages would be limited to the aggrieved party's loss, as per OCGA § 13-6-2. The amounts withheld were credited to the plaintiffs' dealer reserve account and used to cover defaulted contracts, leaving only a minor amount unaccounted for. Consequently, a $10,000 verdict for breach of contract lacks evidentiary support.
Count III of the complaint sought exemplary damages for vacuum cleaners allegedly converted by the defendants. The trial court instructed the jury on conversion related only to negotiable instruments, specifically two checks totaling $1,249.50. However, there was no formal pleading for the conversion of these checks, nor was there a request for damages concerning commercial paper. Pre-trial discovery focused solely on the vacuum cleaners, with plaintiffs' counsel asserting that the defendants had admitted to possessing ten vacuum cleaners sold by the plaintiffs and had refused their return, qualifying as conversion.
Although liberal construction of pleadings is permitted under the CPA (OCGA § 9-11-8(f)), the jury's verdict must align with the issues raised in the pleadings (OCGA § 9-12-1). Issues not raised but tried with the parties' consent can be treated as if pleaded (OCGA § 9-11-15(b)). However, no formal amendment to the pleadings was made, and the defendant did not consent to such an amendment. There is no clear indication of implied consent for unpleaded issues unless recognized by both parties during the trial. Evidence related to the checks was considered relevant to existing pleadings, thus not establishing implied consent for amending pleadings in the absence of a clear intent to introduce new issues.
Objections to the evidence concerning the conversion of two checks would have been dismissed as it was relevant to Count IV. Consequently, any judgment related to Count III must be reversed. The jury's verdict for exemplary damages, which partially relied on the conversion count, is unsustainable. With the verdicts for breach of contract, conversion, and exemplary damages being invalidated, only the fraud verdict remains. The defendant disputes the adequacy of evidence supporting a $20,000 damage award for fraud, asserting that any verdict must align with the matters raised in the pleadings per OCGA 9-12-1. A verdict that does not address the issues in the pleadings must be annulled, as established in Pickron v. Garrett and Moseley v. Binford. Fraud claims must be stated with specificity under OCGA 9-11-9(b), and the jury verdict must reflect this standard of certainty.
Counts I and II alleged fraud regarding multiple contracts, while Count IV addressed additional fraudulent acts, all asserting actual fraud as defined by OCGA 51-6-1, which requires proof of moral fraud. The court erroneously allowed constructive fraud to support claims of actual fraud without proper jury instruction on Counts I, II, and IV. Thus, because the jury did not address the specific allegations of actual fraud, the verdict is unsustainable. The judgment is reversed. Banke, C. J. and Sognier, J. concur.
