Darcars Motors of Silver Spring, Inc. v. Borzym

BATTAGLIA, J. Darcars Motors of Silver Spring, Inc., petitioned this Court to review an award for punitive damages in favor of Marcin Borzym, who prevailed in a jury trial on a claim of conversion against Darcars. We conclude that the evidence was sufficient to support the jury’s finding that actual malice motivated the tort. Further, we hold that Borzym had no duty to present evidence of Darcars’ financial condition in support of his pursuit of a punitive damage award. ²⁵⁵ I. Background In late March of 2000, Marcin Borzym, who was 21 years old at the time, visited Darcars several times to consider purchasing a 1999 BMW 323i, which he had seen advertised in a newspaper for $27,500. The first of these visits took place on Sunday, March 26, when Borzym met with a salesperson, Juste Bahula, and test drove the BMW.

Borzym returned to Darcars the following Monday to negotiate the purchase of the car. Again, he met with Bahula, who discussed various aspects of the potential purchase and accepted a personal check for $3,000 from Borzym as a symbol of his willingness to negotiate seriously. 1 Two days later, Borzym stopped by Darcars for further negotiations after Bahula telephoned him. Borzym and Bahula discussed a lower purchase price of $26,000 because there was a scratch on one of the wheel rims, and Darcars permitted Borzym to take the BMW for inspection by another dealer. On Thursday, after the inspection was completed without any problems discovered, Borzym returned the BMW to Darcars.

Borzym then informed Darcars that he would come back to the dealer the next day to purchase the BMW. Borzym returned to purchase the car during the evening of Friday, March 31. To complete the purchase, Borzym met with a finance manager of Darcars, Douglas Quander, who was responsible for negotiating the amount of the down-payment and other payment terms, including financing rates. Borzym handed $2,500 in cash to Quander as a down-payment.

In addition, Quander had Borzym complete and sign several documents, including (1) a credit application, (2) a purchase order, (3) a retail installment contract, (4) a supplementary agreement to a conditional sales contract, (5) an application for a certificate of title, and (6) an agreement to provide accidental physical damage insurance. 2 Borzym, however, did not ²⁵⁶ leave with the BMW that night, because he was unable to provide information about a State Farm automobile insurance policy that he believed would cover the BMW. When he returned, once again, to the dealer early Saturday morning, he provided the insurance information and left with the BMW. On Sunday, Borzym realized that he had not received any documents reflecting the BMW purchase, so he returned to Darcars, picked up copies of the paperwork, and left -without incident. On Monday morning, Darcars representatives began to question the accuracy of some of the information contained in the sales documents.

That day, Robin Stein, a financial services manager from Darcars, and Quander contacted Borzym by phone to tell him that there was a problem with his automobile insurance information and that he needed to provide information of a different policy. Borzym responded to their requests by obtaining a new policy and informing Stein about that policy information on Tuesday morning. Later that afternoon, Stein called back several more times, however, complaining of further discrepancies in the paperwork and asking Borzym to return to Darcars as soon as he could so they could resolve the issue. Quander also called Tuesday afternoon in hopes of persuading Borzym to meet with him as soon as possible to address the discrepancies in the paperwork.

He was so eager to meet Borzym that he offered him a $500 car service credit if Borzym would come into the dealership. In addition, Quander told Borzym that he was willing to meet him on Tuesday at 10:00 p.m. at Borzym’s health club. No meeting took place on Tuesday, however. Borzym had no further contact with Darcars until the morning of Thursday, April 6, when he walked to the garage where he had parked the BMW and was surprised to see a truck from a repossession company towing the car from the ²⁵⁷ garage.

Borzym asked the driver why the BMW was being repossessed, and the driver told him that there was a “problem” with the “dealership” and that he should go there to resolve it. Inside the BMW when it was repossessed were, according to Borzym, his laptop computer, which he valued at approximately $1500, and his collection of music CDs, which he valued at $300. Borzym called Darcars immediately and spoke to Stein. When he asked why the BMW had been repossessed, she refused to give him a reason over the phone but told him to come to the dealer to discuss the matter.

Borzym complied, making it to Darcars later that evening to meet with Stein and two other representatives of Darcars, a sales manager and the head of Darcars security. One of the Darcars representatives told Borzym that the car had been repossessed because Borzym “didn’t pay anything.” Borzym insisted that he had paid $2,500. He asked for the return of either the BMW with his belongings, the laptop and CDs, or the return of his deposit and his belongings. One of the Darcars representatives replied, “Forget about it.

Get out of here.... [C]all your attorney.” The representative told Borzym that the BMW had been taken to a different lot, and as for the laptop and CDs, he should “|j]ust forget about it, just get out of the office, [and] get lost.” Followed by Darcars staff, Borzym walked outside, where he met his father. When Borzym’s father learned what had happened with the BMW and his son’s belongings, he became upset and confronted Darcars staff. One of the personnel who had met with Borzym began “waving goodbye and making fun” of the Borzyms. This prompted Borzym’s father to walk closer to the staff member, but a security officer stepped in the way.

The staff member then began “cursing out” the Borzyms, accusing them of being “thieves.” Darcars did not return the $2,500 cash down-payment, nor did Borzym recover the laptop and CDs that had been taken during the repossession. ²⁵⁸ Alleging causes of action for breach of contract, conversion, fraud, illegal repossession and punitive damages, Borzym sued Darcars on May 8, 2000, in the Circuit Court for Montgomery County. The Circuit Court dismissed his claims of fraud, illegal repossession and punitive damages, and Borzym amended his complaint to allege only breach of contract, conversion, punitive damages, and illegal repossession. Before trial, the court granted summary judgment to Darcars on the illegal repossession claim, and, during trial, Borzym abandoned his claim of breach of contract. Only Borzym’s claim that Darcars converted Borzym’s $2500 down-payment, laptop, and CDs went to the jury, which on April 3, 2001, returned a $4,300 verdict 3 in favor of Borzym and made a specific finding ²⁵⁹ that Darcars had acted with actual malice, warranting punitive damages.

After hearing testimony on the amount of punitive damages, the jury returned a punitive damage award of $100,000. The Circuit Court reduced that award to $25,000 after Darcars filed a Motion for Judgment Notwithstanding the Verdict and/or Motion for Remittitur. Darcars thereafter appealed. The Court of Special Appeals affirmed the judgment of the Circuit Court.

Darcars Motors of Silver Spring, Inc. v. Borzym, 150 Md.App. 18 , 818 A.2d 1159 (2003). The intermediate appellate court addressed three issues: (1) whether the evidence was sufficient to support a finding of actual malice, (2) whether Borzym adequately pled a claim for punitive damages, and (3) whether the evidence of Darcars’ financial condition was sufficient to support the $25,000 punitive damage award. 4 As to the first issue, the court held that circumstances of the ease allowed an inference to be drawn that Darcars acted with actual malice when it converted Borzym’s down-payment, laptop, and CDs. According to the Court of Special Appeals, one incident that stood out as suggesting malice was the conversation in which a Darcars employee told Borzym to “[fjorget about it,” “[g]et out of here,” “[cjall your attorney,” and “[g]et lost.” Id. at 51 , 818 A.2d at 1177 . The court also found it notable that Darcars did not assert a claim of right to the $2,500 or that it had an honest belief that it was ²⁶⁰ entitled to the $2,500 at issue.

Id. at 52 , 818 A.2d at 1178 . With respect to the second issue, the court concluded that Borzym’s pleadings constituted an adequate demand for punitive damages and alleged facts that would support a claim of actual malice. Id. at 57 , 818 A.2d at 1181 . Thirdly, as to the amount of the punitive damages, the court identified evidence in the record that Darcars was profitable and financially sound and that the dealer sold over 1000 cars per year at prices ranging from $32,000 and $61,000.

This evidence, the court held, was sufficient to support the “relatively modest” punitive damage award of $25,000. Id. at 58-59 , 818 A.2d at 1182 . We granted Darcars’ petition for a writ of certiorari, Darcars v. Borzym, 376 Md. 49 , 827 A.2d 112 (2003), which presented the following questions: 1. Whether the Court of Special Appeals erred in holding that the evidence presented to support a conversion claim by a preponderance of the evidence was legally sufficient to support the finding of actual malice by clear and convincing evidence required for a punitive damages verdict? 2.

Whether the Court of Special Appeals erred in holding that the substantive clear and convincing burden of proof applicable to punitive damages claims has no bearing on the Court’s legal determination of the sufficiency of the evidence to support those claims? 3. Whether a defendant’s ability to pay an award of punitive damages is an essential element of a plaintiffs claim for punitive damages in which the plaintiff bears the burden of proof and the plaintiff failed to meet that burden in this case? We hold that the evidence presented at trial was sufficient to sustain a finding of actual malice. We further hold that, in determining the legal sufficiency of evidence supporting actual malice, a trial court must consider the “clear and convincing” standard of proof.

Moreover, Borzym had no obligation to present evidence of Darcars’ financial condition; therefore, the award of punitive damages stands. ²⁶¹ II. Discussion A. The Evidence is Sufficient to Support a Finding of Actual Malice Darears contends that the Court of Special Appeals erred in holding that the evidence presented in this case was sufficient to support a finding of actual malice by clear and convincing evidence. In Darears’ view, the evidence minimally supports a claim of conversion. Darears asserts that there was absolutely no evidence that any of its actions were based on any evil motive, intent to injure, or fraud, and that, without more, the jury had to “speculate” or “guess” to reach the conclusion that the conversion had been motivated by actual malice.

Darears further takes issue with the Court of Special Appeals’ reliance on Darears’ failure to raise defenses of “claim of right” or “honest belief’ that it was entitled to the $2,500 down-payment, as it posits that such defenses are not necessary to avoid the imposition of punitive damages in a conversion claim. In response to Darears’ arguments, Borzym argues that clear and convincing evidence of actual malice supports his claim for punitive damages. The tort of conversion, according to Borzym, has been committed with actual malice if the evidence shows that the defendant consummated the conversion willfully and -with knowledge of the wrong. In Borzym’s opinion, Darears demonstrated knowledge of the wrongfulness of the conversion when its representative refused to return Borzym’s belongings and stated, “[f]orget about it.

Get out of here. Call your attorney. Get lost.” Conversion is an intentional tort, consisting of two elements, a physical act combined with a certain state of mind. The physical act can be summarized as “any distinct act of ownership or dominion exerted by one person over the personal property of another in denial of his right or inconsistent with it.” Allied Investment Corp. v. Jasen, 354 Md. 547, 560 , 731 A.2d 957, 963 (1999) (quoting Interstate Ins.

Co. v. Logan, 205 Md. 583, 588-89 , 109 A.2d 904, 907 (1954)). This act of ownership for conversion can occur either by initially acquiring the property or by retaining it longer than the rightful ²⁶² possessor permits. As we explained in Merchants’ Nat’l Bank v. Williams, 110 Md. 334, 351-52 , 72 A. 1114, 1117 (1909): Conversion, in the sense of the law of trover, consists either in the appropriation of the property of another, or in its destruction, or in exercising dominion over it in defiance of the owner’s rights, or in withholding the possession from him under an adverse claim of title, and all who aid, command, assist, or participate in the commission of such unlawful acts are hable. Later, in Wallace v. Lechman & Johnson, Inc., 354 Md. 622 , 732 A.2d 868 (1999), we again discussed the types of acts that may give rise to a claim of conversion: [T]he gist of a conversion is not the acquisition of the property by the wrongdoer, but the wrongful deprivation of a person of property to the possession of which he is entitled.

Nor need there exist a forcible dispossession of property to constitute an act of the defendant a conversion. A conversion may consist of a wrongful, tortious or unlawful taking of property from the possession of another by theft, trespass, duress, or fraud and without his consent or approbation, either express or implied. Id. at 633 , 732 A.2d at 874 (quoting Saunders v. Mullinix, 195 Md. 235, 240 , 72 A.2d 720, 722 (1950)). In this case, the jury found that Darcars’ act of retaining Borzym’s $2500 down-payment, laptop and music CDs amounted to an unlawful exercise of dominion over that property.

Besides the physical act of exerting unlawful control, there is an intent element to the tort of conversion, and a wide range of different states of mind qualify. At a minimum, a defendant liable of conversion must have “an intent to exercise a dominion or control over the goods which is in fact inconsistent with the plaintiffs rights.” Keys v. Chrysler Credit Corp., 303 Md. 397, 414 , 494 A.2d 200, 208 (1985). The defendant may have the requisite intent even though he or she acted in good faith and lacked any consciousness of wrongdoing, as long as there was an intent to exert control over the property. For example, “[a] purchaser of stolen goods or an ²⁶³ auctioneer who sells them in the utmost good faith becomes a converter, since the auctioneer’s acts are an interference with the control of the property.” Id.

We have said that, when conversion occurs in these circumstances, punitive damages are not appropriate. K & K Management v. Lee, 316 Md. 137, 174-79 , 557 A.2d 965, 983-85 (1989) (holding that, although the defendant was liable for conversion, punitive damages were unjustified because of an absence of actual malice); Food Fair Stores, Inc. v. Hevey, 275 Md. 50, 56 , 338 A.2d 43, 47 (1975) (reversing an award for punitive damages where the defendant believed that it was entitled to the converted property and, therefore, committed the conversion without any evil or bad intention); Siegman v. Equitable Trust Co., 267 Md. 309, 316 , 297 A.2d 758, 761 (1972) (holding that the plaintiff was not entitled to punitive damages because the conversion occurred not out of an evil motive but as a result of the defendant’s mistake of law). Conversion, of course, also may occur when the defendant’s intent reaches the level of “actual malice.” See Middle States Holding Co., Inc. v. Thomas, 340 Md. 699, 702 , 668 A.2d 5, 7 (1995); K & K Management, 316 Md. at 174-79 , 557 A.2d at 983-85 ; Food Fair Stores, 275 Md. at 56 , 338 A.2d at 47 ; Siegman, 267 Md. at 316 , 297 A.2d at 761 . We have held that, where a defendant commits a tort with “actual malice,” a jury may award the plaintiff punitive damages.

Montgomery Ward v. Wilson, 339 Md. 701, 736 , 664 A.2d 916, 933 (1995); Ellerin v. Fairfax Savings, F.S.B., 337 Md. 216, 241 , 652 A.2d 1117, 1129 (1995); Alexander & Alexander, Inc. v. B. Dixon Evander & Assocs., Inc., 336 Md. 635, 652 , 650 A.2d 260, 269 (1994); Owens-Illinois v. Zenobia, 325 Md. 420, 463 , 601 A.2d 633, 654 (1992). Punitive damages are awarded “[based] upon the heinous nature of the defendant’s tortious conduct,” Zenobia, 325 Md. at 454 , 601 A.2d at 649 , and they serve the purpose of punishing the particular tortfeasor and deterring conduct similar to that which underlay the tort. Id.; see Philip Morris, Inc. v. Angeletti, 358 Md. 689, 773-74 , 752 A.2d 200, 246-47 (2000); Bowden v. Caldor, 350 Md. 4, 22 , 710 A.2d ²⁶⁴ 267, 276 (1998); Owens-Corning Fiberglas Corp. v. Garrett, 343 Md. 500, 537-38 , 682 A.2d 1143, 1161 (1996). In recent years, the law of punitive damages has undergone significant development.

See, e.g., Montgomery Ward, 339 Md. at 736 , 664 A.2d at 933 ; Ellerin, 337 Md. at 241 , 652 A.2d at 1129 ; Alexander & Alexander, 336 Md. at 652 , 650 A.2d at 269 ; Zenobia, 325 Md. at 463 , 601 A.2d at 654 . The leading case in this effort is Owens-Illinois v. Zenobia, in which Judge Eldridge, writing for the Court, made it clear that a jury may award punitive damages only when a plaintiff has demonstrated by clear and convincing evidence that the defendant acted with “actual malice.” 325 Md. at 460 , 601 A.2d at 652 . We have defined the term “actual malice” as “conduct of the defendant characterized by evil motive, intent to injure, ill will, or fraud.” Id.; see Bowden, 350 Md. at 23 , 710 A.2d at 276 ; Scott v. Jenkins, 345 Md. 21, 33 , 690 A.2d 1000, 1006 (1997); Ellerin, 337 Md. at 228-29 , 652 A.2d at 1123 . With respect to the clear-and-convincing standard of proof, we regarded it as “appropriate in the assessment of punitive damages because of their penal nature and potential for debilitating harm.” Zenobia, 325 Md. at 469 , 601 A.2d at 657 .

Our opinions in recent punitive damage cases have examined the intent element of various torts, other than conversion, and defined the type of wrongful motive that may qualify as “actual malice.” In Zenobia , this Court explained what is meant by “actual malice” in the context of products liability, emphasizing that “negligence alone, no matter how gross, wanton, or outrageous, will not satisfy [the] standard [of actual malice].” 325 Md. at 463 , 601 A.2d at 654 . Rather, evidence supports a finding of actual malice if it shows by clear and convincing evidence that the defendant made “a bad faith decision ... to market a product, knowing of the defect and danger, in conscious or deliberate disregard of the threat to-the safety of the consumer.” Id. (emphasis added). In Ellerin , the Court considered the availability of punitive damages where the defendant had committed fraud. 337 Md. at 234 , 652 A.2d at 1126 .

We examined whether fraud “inher ²⁶⁵ ently involves the state of mind and conduct which is ordinarily required for the allowability of punitive damage.” Id. at 229 , 652 A.2d at 1123 . We reemphasized that only evidence of “actual malice” supports an award of punitive damages: “Maryland law has limited the availability of punitive damages to situations in which the defendant’s conduct is characterized by knowing and deliberate wrongdoing.” Id. at 228, 233 , 652 A.2d at 1123, 1125 . Because one could commit fraud with only “reckless disregard” for the truth, we concluded that not all instances of fraud warrant the imposition of punitive damages. Id. at 235 , 652 A.2d at 1126 .

Nevertheless, a plaintiff satisfies the element of “actual malice” and supports a punitive damage award when the evidence shows that the defendant committed fraud with “actual knowledge of falsity, coupled with [an] intent to deceive.” Id. at 234 , 652 A.2d at 1126 . In Montgomery Ward , a case involving the tort of malicious prosecution, we reaffirmed the notion that only evidence of “actual malice” supports an award of punitive damages. 339 Md. at 735-36 , 664 A.2d at 933 . We stated that, in a claim of malicious prosecution, punitive damages may be awarded only if there is clear and convincing evidence of “the defendant’s wrongful or improper motive for instigating the prosecution” without probable cause. Id.

It was not enough for the plaintiff in that case' to present evidence only of a lack of probable cause, because that alone would allow a punitive damage award where there is an “inadequacy of investigation.” Id. at 735 , 664 A.2d at 933 . “Inadequacy of investigation does not mean that [the defendant’s] motive was anything other than bringing a thief to justice,” a motive that does not equate to actual malice. Id. Like in the context of products liability, fraud, and malicious prosecution, the availability of punitive damages for the tort of conversion depends on the intent of the tortfeasor. While a plaintiff may obtain a compensatory damage award by proving merely that the defendant, without bad faith, intended to exert unlawful dominion over the plaintiffs property, punitive damages may be awarded only if the defendant demon ²⁶⁶ strated “actual malice” in carrying out the conversion.

The term “actual malice” in the context of conversion requires little explanation beyond the definition we have established in our previous cases: consciousness of the wrongdoing or “conduct of the defendant characterized by evil motive, intent to injure, ill will, or fraud.” Zenobia, 325 Md. at 460 , 601 A.2d at 652 ; see Bowden, 350 Md. at 23 , 710 A.2d at 276 ; Scott, 345 Md. at 33 , 690 A.2d at 1006 ; Montgomery Ward, 339 Md. at 735-36 , 664 A.2d at 933 ; Ellerin, 337 Md. at 228-29 , 652 A.2d at 1123 . Where the defendant converts property with a consciousness of the wrongfulness of that conversion, he or she possesses the requisite improper motive to justify the imposition of punitive damages. The evidence presented in this case is sufficient to demonstrate that Darears had an improper motive in converting Borzym’s $2,500 cash down-payment, laptop, and music CDs. When Borzym met with Darears employees to discuss the repossession of the BMW and to inquire about his down-payment, laptop, and CDs, a Darears representative told him to “Forget about it.

Get out of here____[C]all your attorney” and “get lost.” Darears did not make the BMW available to Borzym to retrieve his belongings, and even after Borzym had left the dealership office, Darears representatives continued their inappropriate behavior. Outside the office, when Borzym’s father learned of his son’s troubles and approached Darears officials, they began sarcastically waving goodbye to the Borzyms, and one Darears employee “cursed out” the father and son and accused them of being thieves. Evidence of this conduct provides a sufficient basis for the jury’s conclusion that Darears representatives acted with actual malice in the unlawful retention of Borzym’s property. The evidence of Darears employees pretentiously dismissing Borzym’s inquiries about his property, cursing, and then commenting, “get lost” and “call your attorney,” suggests malice.

That evidence, combined with evidence of the heated exchange between Darears personnel and Borzym, certainly could lead to the conclusion that the conversion of the property was, in ²⁶⁷ effect, a retaliation for Borzym’s failure to resolve the dispute on Darears’ terms. Accordingly, the evidence was sufficient to support the jury’s finding of actual malice. B. Actual Malice Must Be Supported by Clear and Convincing Evidence This Court’s holding in Zenobia left no question as to what level of proof is required for a plaintiff to establish “actual malice” in support of a claim for punitive damages. A party seeking punitive damages must prove actual malice by “clear and convincing evidence.” 325 Md. at 469 , 601 A.2d at 657 .

As we stated in Zenobia : Use of a clear and convincing standard of proof will help to insure that punitive damages are properly awarded. We hold that this heightened standard is appropriate in the assessment of punitive damages because of their penal nature and potential for debilitating harm. Consequently, in any tort case a plaintiff must establish by clear and convincing evidence the basis for an award of punitive damages. Id.

In the case now before us, after holding that the evidence in this case was legally sufficient to support a finding of actual malice, the Court of Special Appeals deviated from the central issues. It expressed the view that the “clear and convincing” standard of proof has no bearing on a court’s determination of the sufficiency of the evidence supporting actual malice. Stated somewhat differently, it held that a trial judge should not consider the heightened standard in deciding whether a plaintiff had met the burden of production on the issue of actual malice, which, if met, would allow the question of actual malice to reach the jury. In the intermediate appellate court’s view, “clear and convincing evidence” relates only to the burden of persuasion — the level of certainty