Riley Hill General Contractor, Inc. v. Tandy Corp.

Citations: 737 P.2d 595; 303 Or. 390; 1987 Ore. LEXIS 1391Docket: CC 84-02-19,378-L; CA A35863; SC S33551

Court: Oregon Supreme Court; May 27, 1987; Oregon; State Supreme Court

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Riley Hill General Contractor, Inc. filed a lawsuit against Tandy Corporation, claiming fraud, breach of warranty, and negligence related to a purchased computer. Tandy Corporation denied these claims and asserted a defense of contributory fault. The trial court instructed the jury that allegations of fraud must be supported by clear and convincing evidence, although the overall burden of proof in civil cases is by a preponderance of the evidence. Tandy Corporation objected to this instruction. The jury ruled in favor of Riley Hill, but the Court of Appeals reversed the decision, citing inconsistencies in the burden of proof instructions. The Supreme Court of Oregon reviewed the case to clarify the burden of persuasion for common law deceit, ultimately ruling that it requires clear and convincing evidence for all deceit elements, while general or punitive damages can be established by a preponderance of the evidence. Riley Hill, who owned multiple small businesses, sought a computer system for bookkeeping. After an unsatisfactory experience with the initial purchase and subsequent system, he alleged Tandy Corporation was aware of the computer's potential defects yet marketed it without necessary corrections. Despite Tandy's offer to refund the purchase, Hill proceeded with legal action.

The Court of Appeals reversed the trial court's decision, determining that the jury instructions were inconsistent by presenting two conflicting standards for the burden of proof in fraud cases: "clear and convincing evidence" and "preponderance of the evidence." This inconsistency constituted reversible error, as it left uncertainty regarding which standard the jury applied in their verdict. The excerpt also discusses the definitions and historical context of the terms "preponderance of evidence" and "clear and convincing evidence." "Preponderance," originating from the Latin "praeponderare," means the greater weight of evidence, which historically involved a literal counting of witness heads and weighing testimony. The Uniform Jury Instructions clarify that a party must prove their claims by a preponderance of the evidence, defined as evidence that has more convincing force. Mellinkoff notes that while some legal terms have specific meanings, terms like "clear and convincing" and "preponderance of the evidence" are more flexible and less precise. The excerpt concludes with a brief exploration of the linguistic origins of these terms, tracing back to the influence of Celtic and Anglo-Saxon languages in Britain.

Celtic influence on legal language is minimal, yet the coexistence of Celtic and Anglo-Saxon languages contributed to a tendency toward tautology, where two words express a single idea. This phenomenon is exemplified by place names like Breedon-on-the-Hill, which combine Celtic and Old English elements. The author suggests that such redundancies reflect a misunderstanding by the Anglo-Saxon invaders rather than knowledge, indicating the blending of languages over time. 

Mellinkoff traces the evolution of English, originating from the Angles around 450 A.D., and highlights its Teutonic roots linked to the broader Indo-European language family, which also includes Latin and French. He lists numerous legal terms that exhibit this duality, such as "devise and bequeath" and "infant and child," demonstrating the practice of pairing synonyms for clarity, emphasis, or stylistic reasons. 

An example of this linguistic pattern is found in the legal standard "clear and convincing," where "clear" conveys unambiguous evidence and "convincing" pertains to the persuasive effect on an observer. The word "clear" derives from Norman French and implies ease of understanding, while "convincing" relates to the strength of the evidence presented.

The term "clear" post-Norman Conquest could confuse due to its similarity to the English word "clean," which signified completeness without exceptions. "Convincing," derived from Latin, implies overcoming or proving a point in argument. The introduction of these terms coincided with the Norman Conquest in 1066, where King William I utilized trusted Norman followers while requiring adherence to English law and customs. His strategy facilitated acceptance of the new social order, as evidenced by Normans rebelling while Englishmen supported the king during the last major revolt of his reign.

William I aimed to maintain a separation of church and state, ensuring ecclesiastical courts had no more rights in England than in Normandy. He established a dual system of ecclesiastical and common law courts operating in Norman French and English. His commissioners brought royal authority to local shire courts, significantly influencing English judicial practices, particularly through the introduction of juries for collective verdicts, a hallmark of his administration.

William's assimilation policy encouraged the combination of Norman French and Anglo-Saxon terms in legal contexts. Understanding the terms requires examining their origins and judicial usage. The "clear and convincing" standard of proof was initially applied in equity to counter claims prone to fabrication or memory issues, representing a compromise in chancery courts between addressing potential fraud and adhering to strict legal policies.

In jury trials for civil actions, the "clear and convincing" standard is applied to cases involving fraud or deceit and related equitable defenses. To enforce this standard during appeals, courts may require jury instructions that mandate this level of proof; failure to do so can lead to reversal. The standard of "clear and convincing" evidence, which reflects a higher burden than mere preponderance, is recognized in civil law, particularly in cases where reputational harm is at stake. The U.S. Supreme Court has affirmed this standard in various quasi-criminal contexts where significant individual liberties or stigmas are involved.

Oregon law sets forth different levels of proof in civil and criminal cases, codified in ORS 10.095(5) and (6). In civil actions, the plaintiff's burden is generally a preponderance of the evidence, but there are exceptions where a higher standard may apply. The Oregon Supreme Court has affirmed that there are three recognized standards of proof: preponderance, "clear and convincing," and "beyond a reasonable doubt," with "clear and convincing" requiring that the truth of the facts asserted be highly probable. This distinction has been consistently supported in case law.

In *Mutual of Enumclaw Ins. v. McBride*, the court refrained from establishing a higher proof standard for common law fraud, finding the statutory provisions for fraud and false swearing insufficiently similar to common law fraud. The court emphasized that in civil cases, the standard is a preponderance of evidence, while in criminal cases, it is beyond a reasonable doubt, as mandated by ORS 10.095. The court noted that the "clear and convincing" standard is justified in cases of deceit due to the gravity of branding a defendant with guilt. This standard was acknowledged as dictum in *Cook v. Michael* but has since become established practice in Oregon. 

Historically, the language surrounding the "clear and convincing" standard has evolved, with various formulations noted from earlier cases. The trial court in this instance referenced the 1935 case *Metropolitan Cas. Ins. Co. v. Lesher*, which held that fraud relied upon as a defense must be established by clear and convincing evidence, despite the overarching preponderance standard in civil cases. Justice Lusk further clarified that this did not overturn the principle that preponderance of evidence is the ultimate requirement in civil actions. The concept of degree of proof was discussed, distinguishing between the weight of evidence and the level of proof required for establishing facts in legal proceedings.

Proof of fraud requires a clear and convincing standard, while factual issues in civil cases are determined by a preponderance of the evidence. The case Cook v. Michael partially overruled Lesher regarding the definition of "satisfactory evidence" under ORS 41.110. The court overruled the remaining implications in Lesher and Wilkerson that a clear and convincing proof standard could coexist with a preponderance standard for burden of persuasion. The terms "fraud," "deceit," and "misrepresentation" are often used interchangeably in Oregon case law, leading to confusion. According to Prosser and Keeton, the law of misrepresentation is broader than deceit, which typically requires intent to mislead, while negligence and strict liability are addressed in other contexts. The elements of deceit include: (1) a false representation by the defendant; (2) the defendant's knowledge or belief that the representation is false; (3) intent to induce reliance by the plaintiff; (4) justifiable reliance by the plaintiff; and (5) resulting damage. The trial court instructed the jury to evaluate these elements as alleged in the complaint. The court acknowledged deceit as a distinct tort and adopted Prosser and Keeton's elements, emphasizing that justifiable reliance is a legal conclusion rather than a factual pleading requirement. The unique aspect of deceit is the intent to deceive, which is more complex than in other torts like assault and battery, necessitating a belief in the falsity of the representation.

Determining the speaker's state of mind is crucial in evaluating claims of deceit, particularly regarding intentional or reckless representations. Proving deceit requires establishing that the speaker either intended to deceive or acted with reckless disregard for the truth, even if they lacked belief in the truth of their statements. The law protects the interest of individuals in making informed business decisions without being misled. A party found guilty of deceit bears a stigma similar to that of criminal conduct.

In civil actions for common law deceit, the standard of proof is "clear and convincing," meaning that evidence must be highly probable and free from confusion. A trial judge should not confuse the terms "clear and convincing" with "preponderance of the evidence" in jury instructions. While the deceit must be proved to this higher standard, the extent of damages can be established by a preponderance of the evidence. The appellate court affirmed the lower court's decisions regarding procedural matters while remanding the case for a new trial focused solely on the deceit claim and punitive damages.

Plaintiff's claim is identified as deceit rather than general fraud, referencing Prosser and Keeton on Torts. Under OEC 305, the burden of persuasion lies with the party asserting each fact essential to their legal claim or defense. The terminology has shifted since January 1, 1982, from "burden of proof" to "burden of persuasion." The excerpt includes poetic references from Rudyard Kipling that illustrate cultural perspectives and social dynamics relevant to historical governance and justice. It also cites various legal precedents (e.g., Santosky v. Kramer, Addington v. Texas) that highlight the burden of persuasion in different contexts such as parental termination and civil commitment, along with Oregon case law emphasizing similar principles.

Fraud allegations must be substantiated by clear, convincing, and satisfactory evidence, as established in various Oregon case law, with plaintiffs bearing the burden of proof. The court should avoid instructing the jury about presumptions, as the term can misleadingly imply that a presumption serves as evidence. Instead, once a party presents basic facts supporting a presumption, the opposing party must disprove it by a preponderance of evidence, without the jury being informed about the concept of presumption. This approach aims to enhance clarity in jury instructions and aligns with legislative intent regarding the treatment of presumptions.

The jury ruled in favor of the plaintiff on multiple claims, including fraud and negligence, attributing 64% of the negligence to the defendant and 36% to the plaintiff. The jury was also instructed on the possibility of awarding punitive damages if they found the defendant liable for fraud or negligence, with potential punitive damages set at $60,000.