Smith v. Attorney General

Gilbert, C. J., delivered the opinion of the Court. This appeal would never have arisen in the days of yore, when caveat emptor ruled supreme. Those days, it seems, are gone forever, and if not, are at least passe at this time. Caveat emptor has been replaced by caveat venditor.

The instant ctfse is concerned with the Maryland General Assembly’s effort to afford greater protection to the consumer in the form of Consumer Protection Laws (CPL), Maryland Commercial Law Code Ann. (1975) §§ 13-301 — 501. The matter reaches us because the appellants, Marilyn Smith, Jack Smith, Smith Furniture Co., and Smith Furniture Discount, Inc. 1 were assessed civil penalties of $300 in each of 100 alleged violations of the CPL, a total of $30,000. In addition to the civil penalty, the court appointed a receiver to take charge of and operate the furniture business of the appellants. This litigation was commenced when the Attorney General of Maryland filed a suit in the Circuit Court for Washington County against the appellants for alleged ⁸⁰ violations of the consumer protection laws.

At the conclusion of the trial, the circuit court, in addition to the civil penalties to which we have made reference, 1) awarded costs against the appellants; 2) ordered that the appellants jointly and severally pay the sum of $2,075.06 to six named former customers of the appellants; 3) directed the Washington County Sheriff to take custody "immediately” of the property and assets of Smith Furniture Discount, Inc.; and 4) appointed co-receivers of the property and assets of Smith Furniture Co. 2 Vastly upset by what they view as defects in both the trial procedure and the relief granted, the appellants raise an octad of issues for our review, namely: "I. Whether one who in good faith makes a promise to perform in a certain manner and is later unable to perform because of intervening conditions is guilty of an unfair or deceptive trade practice?

II

Whether under the Maryland Consumer Protection Act a Court may find a defendant guilty of violations soley [sic] on the basis of the number of complaints made against and where the complaints are unsupported by the testimony of the complaining parties as witnesses at the trial or other credible evidence?

III

May Jack Smith be found guilty of a violation of the Consumer Protection Act when there is no testimony, evidence, or allegation that he was a participant in any of the alleged conduct, or that he had knowledge of the existence of the alleged conduct? ⁸¹ IV. Whether it is a denial of due process of law for the State to fail to follow the Mandatory Conciliatory provision set forth in its own Code? V. Whether the general allegations in the 'Seven Day Notice of Injunctive Relief filed by the State were so lacking in specificity that the Appellants were not accorded a fair opportunity to defend and were thereby deprived of due process of law?

VI

Whether the Appellants were deprived of their Constitutional right to a jury trial?

VII

Whether the Appellants were deprived of their property without due process of law when the Court ordered the Sheriff immediately after the trial to take possession and control of all of the property and assets of Smith Furniture Discount, Inc., Smith Furniture Company and any and all assets related to the conduct of that business and to maintain control over these assets until such time as a receiver was appointed?

VIII

Whether the charges against the Appellants in this case were so totally devoid of evidentiary support as to render the judgment against them unconstitutional under the Due Process Clause of the Fourteenth Amendment?” We have set out below the skeletal facts of the case in order for the reader to have a better understanding of why the appellants appear in this true-to-life drama, cast in two roles, depending upon through whose eyes one sees the play. The Attorney General depicted appellants as conniving ⁸² merchants concerned solely with lining their own pockets at the expense of their mistreated and abused customers. The appellants, however, see themselves as harassed small business people who have done their utmost to satisfy and service their customers, but whose efforts have been frustrated by matters beyond their control. Marilyn and Jack Smith own and operate the Smith Furniture Co., located exclusively in Hagerstown, Maryland, and which, as its name suggests, is a retail furniture store.

The business is characterized in the record as "a typical mom and pop operation.” The Smiths’ son, Morris, owns a truck. He is employed by the company to make pickups of furniture from a variety of manufacturers and to deliver furniture to customers. In both instances he uses his own truck. Frequently, another employee of the furniture store helps him.

Mr. Smith, because of declining health, has become relatively inactive in the business with the result that Mrs. Smith presently operates it almost single-handedly, save for the signing of checks, which power allegedly still remains exclusively in her husband. During 1975 and 1976, but prior to November 10, 1976, the Consumer Protection Division (Division), at its Hagerstown office, received approximately twenty written complaints from customers of the Smith Furniture Co. The complaints were with regard to the business practices of the Smiths which led to customer dissatisfaction with the way the furniture company was servicing orders for furniture. According to Mr. Larry E. Munson, a consumer protection investigator, who testified as an expert at trial, the complaints prior to November 10, 1976, fell into three categories: eleven concerned missed and rescheduled delivery dates; three were about the receipt of wrong furniture; and six resulted from the failure to receive any furniture at all. Because the Division thought it had reasonable grounds to believe the practices about which complaints were made may have been unfair and deceptive and thus prohibited under Commercial Law § 13-301, it attempted to remedy the ⁸³ situation by way of conciliation. 3 Smith Furniture and the Division, on November 10, 1976, entered into a written "Assurance of Discontinuance” pursuant to section 13-402 (a). 4 The agreement was signed by Jack I. Smith in his individual capacity and T/A Smith Furniture Co. In the agreement, Smith covenanted, without admitting the truth of the Attorney General’s allegations, that the company would henceforth deliver furniture on agreed dates and refrain from delivering different or damaged goods.

The Attorney General, in return, contracted to withhold further action so long as "Jack I. Smith, T/A Smith Furniture Company” did not breach the Assurance. Subsequent to entering into the Assurance, the Division continued to receive complaints in increasing numbers against Smith Furniture. The number of complaints filed in each of the three categories to which Munson testified, were 65, 13, and 18, respectively. It was stipulated between counsel that since 1975, the Division had received a total of at least 100 complaints against the appellants.

Inasmuch as the "Assurance of Discontinuance” had no deterrent effect on the Smith Furniture Company, the Attorney General took the next step allowed by the Consumer Protection Act. He instituted an action against ⁸⁴ the appellants under section 13-406 (a) of the Act so as to obtain an injunction and other appropriate relief. Before doing so, however, and in compliance with section 13-406 (b) of the Act, the Attorney General served a notice of the general relief sought seven days in advance of the filing of the Bill. An offer of conciliation was served with the notice which read in pertinent part: "The .. . [Division] hereby offers ... [Jack Smith, T/A Smith Furniture Company and Jack Smith, individually] an opportunity to conciliate the alleged violations of the Maryland Consumer Protection Act.

If you intend to conciliate these matters please contact... [the Division] in writing no later than seven (7) days from the date this Notice and Offer of Conciliation are received.” The Attorney General apparently received no reply to his offer. A Bill of Complaint filed by the Attorney General alleged that the appellants had committed unfair or deceptive trade practices as defined in section 13-301 (1) and (9) iii and a violation of section 13-303 (1) and (2). The Bill in part reads as follows: 5 .. [The appellants have] engaged in the following unfair or deceptive trade practices as defined in Section 13-301 of the Maryland Consumer Protection Act: A. false, misleading, oral and written statements, other representation, of her ability to procure and deliver furniture and other consumer goods to consumers, which have the capacity, tendency and effect of ⁸⁵ deceiving and misleading consumers, under ... (1); B. deception, fraud, false premise, misrepresentation and knowing concealment, suppression and omission in the subsequent performance of an agreement of sale concerning her failure to procure and deliver furniture as promised, with the intent that consumers rely on the same, under Paragraph (iii) of...

(9), and C. deception, fraud, false premise, misrepresentation and knowing concealment, suppression and omission in the subsequent performance of an agreement of sale by the willful delivery of unordered merchandise different from and instead of that merchandise purchased by consumers, with the intent that consumers rely on the same, under Paragraph 8 (iii) of ... (9) [and] 6. The unfair or deceptive trade practices described above are in violation of Section 13-303, ... (1) and (2) of the Maryland Consumer Protection Act. 7.

The Attorney General further alleges that the above unfair or deceptive trade practices by the Respondent, in her capacity as agent for Smith Furniture Company and Jack I. Smith, owner of said business, are in violation of the provisions of an Assurance of Discontinuance, a copy of which is attached hereto and made a part hereof as Exhibit A, agreed to and entered into by Jack I. Smith with the Attorney General on November 10, 1976, pursuant to Section 13-402 (b) of the Maryland Consumer Protection Act. 8. Violation of the Assurance of Discontinuance as described, is a violation of Section 13-303, ... (1) ⁸⁶ and (2), of the Maryland Consumer Protection Act as provided by Sections 13-402 (c) and 13-301 . . . (10).” 6 A Special Examiner was appointed, pursuant to Maryland Rule 580 a, for the purpose of taking testimony.

Twenty complainants appeared before the examiner. Mrs. Smith was present with counsel at each of the hearings held by the examiner. Transcripts of the testimony, exhibits, documents, and his own summary report were filed by the examiner with the circuit court. Ten days later, no sufficient cause to the contrary having been shown, the evidence was adopted by the court.

Md. Rule 580 p. The Special Examiner’s summary of the testimony, in pertinent part, was as follows: "The witnesses heard by the Special Examiner were customers of Smith Furniture Co., a long established retail furniture business located ... in Hagerstown. All of the witnesses had direct dealings with Mrs. Marilyn Smith. . . . Mr. Jack I. Smith was not present due to illness. "The bulk of the testimony by far related to delays in delivery or non-delivery of merchandise.

Each witness who testified did not receive his merchandise when promised by Mrs. Smith. Nearly every witness testified that Mrs. Smith, in explaining delays in delivery, told them that her truck had broken down. . . . [T]he testimony was very similar in most of the cases. The customer would see an advertisement of Smith Furniture Co. and would go to the store to see the furniture. The customer would then buy some furniture and Mrs. Smith would set up a delivery ⁸⁷ date.

In most cases, no delivery date would be set up until the furniture had been paid for in full. When the time came for delivery, none would be made. Either the customer would then call Mrs. Smith or much more infrequently, Mrs. Smith would call the customer, to arrange a new date for delivery. The pattern of non-delivery and arrangement of a new date then repeats, often as many as eight to ten times or more until the customer would demand a refund. ... [S ]ome of the customers went so far as to file District Court cases against Smith Furniture.

In all cases, the customers filed complaints with the . .. [Division]. As to the credibility of the witnesses, there are a few observations of which the Court .. . should be made aware. None of the witnesses impressed the Examiner as being particuarly adept or shrewd in business dealings. .. . Your examiner found the witnesses, on the whole, to be honest, truthful and believeable.” A trial was had on August 8 to 10, 1979, in the circuit court.

Eight persons, including Mrs. Smith, gave testimony. The witnesses included two former employees and a former furniture supplier of Smith Furniture’s. From the totality of the evidence, that is, the Special Examiner’s hearings and the trial testimony, the chancellor found that "in the period of time covered there have occurred at least 100 separate and distinct violations.” Consequently, the trial judge entered an order appointing a receiver for Smith Furniture Co. (section 13-406 (c) (3)), assessed civil penalties in the amount of $30,000 (section 13-410 (a)), payment of costs by the Smiths (section 13-409), and restitution of $2,075.06 (section 13-406 (c) (2)). I. — GOOD FAITH PROMISES — The appellants argue that the evidence was insufficient to support a finding of an unfair or deceptive practice as ⁸⁸ defined by section 13-301 (9).

That section establishes a prohibited practice as "[deception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same. ...” There was evidence that the appellants took orders for furniture that was supposedly in the "warehouse” and promised prompt delivery. There was also evidence that no warehouse existed, and while some of the furniture was specially ordered, much of it was not. Delivery dates were not met. The appellants seek to excuse themselves on the ground that weather and mechanical failure (a broken-down truck) precluded timely delivery.

Perhaps, had the situation been one of an isolated incident the trier of fact may have believed appellants. As it is, however, the trier of fact simply did not believe the representations made to him by Mrs. Smith. The repeated excuses of the delivery truck’s breaking down, or difficulty at the furniture factory reached the same point as the youth in the fable about "crying wolf’ too often. Moreover, the chancellor was entitled to infer from the evidence that at the time the furniture was sold, the appellants knew or should have known that they could not meet the promised delivery date.

Notwithstanding that knowledge, the