Weisman v. Connors

WILNER, Judge. Arthur Connors sued Frederick Weisman and Frederick Weisman Company (FWC), whom we shall sometimes collectively refer to as Weisman, in the Circuit Court for Anne Arundel County. The nature of the action is described in this Court’s Opinion in Weisman v. Connors, 69 Md.App. 732 , 519 A.2d 795 (1987) and in the Opinion of the Court of Appeals in 312 Md. 428 , 540 A.2d 783 (1988). Suffice it to say, for purposes of this proceeding, that (i) Frederick Weisman was the sole owner of FWC, a holding company whose chief component was a major Toyota distributorship known as Mid-Atlantic Toyota (MAT), (ii) in 1981, Mr. Weisman induced Connors, then a high-level executive with ⁴⁹¹ Ford Motor Company, to leave Ford and accept employment with Weisman, (iii) Connors left Weisman’s employ after 27 months, believing that he had been constructively discharged, and (iv) he thereafter sued Weisman for breach of contract, negligent misrepresentation, and fraud.

The negligent misrepresentation and fraud counts were based on six alleged misrepresentations made by Weisman and relied upon by Connors, namely: (1) that Connors would have broad executive responsibilities with regard to FWC in all aspects relating to the automobile business; (2) that Connors would not be simply the general manager of MAT, which already had a general manager, one Robert McCurry; (3) that FWC would replace a $200,000 life insurance policy that was being provided by Ford; (4) that Connors would receive equity participation in all new FWC ventures relating to the automobile business and that the value of those interests would more than offset the benefits Connors would lose by leaving Ford; (5) that FWC and MAT had a secure and stable franchise relationship with the Toyota organization; and (6) that Weisman had a basically amicable relationship with MAT’S manager, Mr. McCurry—nothing more serious than a “communications problem.” All three causes of action were submitted to a jury, which (i) found the defendants liable for breach of contract and negligent misrepresentation, (ii) awarded damages of $221,-900 and $2,705,961, respectively, on those causes, and (iii) found in favor of the defendants on the fraud count. From the judgment entered on those verdicts, both sides appealed. Weisman complained principally, although not solely, about the action for negligent misrepresentation and the evidence and calculation of damages in that action. Connors complained about the court’s instructions on the fraud count and on certain aspects of the breach of contract ⁴⁹² count.

His complaint as to the fraud count was that the court effectively told the jury that the alleged fraud had to be proved beyond a reasonable doubt, rather than by the lesser standard of clear and convincing evidence. Because Connors was apparently satisfied with the net result of the verdict, however, he made clear to us at oral argument that his cross-appeal was merely a “protective” one—that if this Court was inclined to affirm the judgment entered by the Circuit Court on the breach of contract and negligent misrepresentation counts, he did not wish a reversal or new trial on the fraud count. See Weisman v. Connors, 69 Md.App. at 737 n. 1, 519 A.2d 795 . This Court did not set aside the favorable judgment but instead affirmed it.

We therefore did not address any of the three issues raised in the cross-appeal. Aggrieved by our decision, Weisman sought certiorari in the Court of Appeals, complaining principally about our affirmance of the judgment entered on the negligent misrepresentation count. 1 In a conditional cross-petition, Connors asked that, if the Court of Appeals decided to review any of the issues raised by Weisman, it also consider whether the trial court properly instructed the jury on the standard of proof for fraud. The Court of Appeals granted Weisman’s petition to consider three issues: whether it is unnecessary to consider the question of duty as a prerequisite to liability in negligence for misrepresentation; whether a person could be liable for negligently but not fraudulently misstating his or her intentions; and what the appropriate measure of damages should be where one enters into a personal services ⁴⁹³ contract through misrepresentation. The Court denied Connors’ conditional cross-petition and thus declined to review the instructions on the fraud count.

In an Opinion filed in May, 1988, the Court of Appeals concluded, essentially, that (i) the tort of negligent misrepresentation is alive and well in Maryland, (ii) there was sufficient evidence in this case to permit the jury to find that Weisman had a duty to Connors not to make negligent misrepresentations of present or past facts about the position being offered to Connors, (iii) of the six representations complained of by Connors, the first four enumerated above constituted expressions of Weisman’s “present intention” that were not mistakenly made contrary to his actual then-present intention, and so those four representations could not serve as the basis of liability for negligent misrepresentation, and (iv) the other two representations constituted statements of present facts and could serve as the basis of liability, in that there was sufficient evidence that they were false, that they were negligently asserted, that Weisman intended for Connors to act on them and had reason to believe that Connors would rely on them, that Connors was justified in relying on them, and that he sustained damage as a result. Weisman v. Connors, 312 Md. 428 , 540 A.2d 783 (1988). Because the Court’s fourth conclusion required a retrial on the negligent misrepresentation count, the Court did not directly address the issue of damages, although, in a pregnant footnote, it cautioned the Circuit Court to be a bit careful in that regard. The initial mandate appended to the Court’s Opinion read: “AS TO THE NEGLIGENT MISREPRESENTATION COUNT OF THE COMPLAINT: JUDGMENT OF THE COURT OF SPECIAL APPEAL REVERSED; CASE REMANDED TO THAT COURT WITH DIRECTIONS TO REMAND THE CASE TO THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY FOR A NEW TRIAL; COSTS TO ABIDE THE RESULT.” ⁴⁹⁴ Connors quickly realized that this disposition left in limbo his complaint about the instructions on the fraud count.

Neither this Court nor the Court of Appeals had addressed that complaint, although it had been properly raised and, in light of the ultimate reversal of the judgment on the negligent misrepresentation count, it had become “unmoot.” He therefore asked the Court of Appeals to clarify its mandate by directing this Court to consider that issue. The Court found merit in Connors’ request and amended the mandate to read: “AS TO THE NEGLIGENT MISREPRESENTATION COUNT OF THE COMPLAINT: JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED; CASE REMANDED TO THAT COURT FOR RULING ON THE ISSUES RAISED BY THE APPELLEE ON CROSS-APPEAL AND, THEREAFTER, THE COURT OF SPECIAL APPEALS IS DIRECTED TO REMAND THE CASE TO THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY FOR A NEW TRIAL; COSTS TO ABIDE RESULT.” (Emphasis added.) Weisman v. Connors, 312 Md. at 460-61 , 540 A.2d 783 . Weisman objected to the Court’s amending its mandate. In a motion for reconsideration, he contended that (1) by denying Connors’ cross-petition, the Court had “effectively disposed of the fraud issue,” and that our “decision on the fraud count” was therefore final and unreviewable, (2) by making clear in this Court that he did not want a reversal of the judgment entered in the Circuit Court, Connors had “made clear to the Court that the fraud claim was not a serious or important one” and that he had thus failed to preserve the issue for further review, and (3) by directing this Court to consider “the issues raised by the Appellee on cross appeal,” the Court had authorized us to “reconsider” two issues relating to the breach of contract claim, as to which Connors had not sought certiorari.

The Court of Appeals denied Weisman’s motion, and so the case was returned to us under the amended mandate. ⁴⁹⁵ The crux of the cross-appeal is this instruction, reprinted in full, that the trial judge gave to the jury concerning the standard of proof to be applied to Connors’ allegations of fraud: “Now when we go to fraud, fraud has to be proven by what’s called clear and convincing evidence. It’s a higher test than a preponderance of the evidence. To be clear and convincing evidence must be clear, plain to the understanding and unambiguous. Stated differently, to be clear and convincing the evidence of fraud must be such that you’re left without reasonable doubt.

The plaintiff though does not have to prove the case beyond all possible doubt or to a mathematical certainty. Nor is the plaintiff required to negate every conceivable circumstance that could have occurred to the effect that the defendant did not commit fraud. Has to prove it beyond a reasonable doubt as I said before, and a reasonable doubt is a doubt founded upon reason. Great—great description.

It’s not a fanciful doubt or a whimsical or a capricious doubt. It is such a doubt as would cause a reasonable person to hesitate to act in the graver or more important transactions of life. Thus if the evidence is of such a character as to persuade you of the truth of the charges against the defendant or defendants in this case, same applies with the two defendants in this case, separately or collective, with the same force that would be sufficient to persuade you to act upon that abiding conviction of truth in the graver or more important transactions of your own life, you may conclude that the plaintiff has met its burden of proof beyond a reasonable doubt. However, if that doesn’t occur, you can’t find fraud, and you don’t find fraud damages and you don’t find punitive damages.” (Emphasis supplied.) Connors’ argument is straightforward: the standard of proof required to establish fraud is that of clear and convincing evidence; that standard is a lesser—more lenient-one than proof beyond a reasonable doubt; read as a whole, ⁴⁹⁶ the court’s instructions in effect told the jury that the alleged fraud had to be proved beyond a reasonable doubt; that was wrong, and, as the jury returned a defendants’ verdict on the fraud count, the error was prejudicial.

Weisman makes three arguments in response. He claims that (1) the instruction was correct, (2) even if not correct, the instruction was not prejudicial because Connors failed to prove any fraud, and (3) Connors, in any event, waived his right to complain. We shall deal with these contentions in inverse order. Waiver Weisman’s waiver argument is premised on the acknowledgment by Connors at the earlier oral argument before us that the cross-appeal was essentially a protective one and that he did not wish a reversal if he was successful as an appellee.

Weisman sees in this an implication on Connors’ part that “his fraud claim was not serious or important enough to merit this Court’s attention.” We certainly did not see then, and do not see now, any such implication. It was apparent to all that punitive damages were available only upon the fraud count; it was also apparent, however, that Connors had won a $2.7 million compensatory judgment against Weisman following litigation that was long, hard-fought, and no doubt terribly expensive. We did not regard Connors’ statement as, in any sense, constituting an abandonment of the cross-appeal but simply a pragmatic decision not to press for a new trial simply in the hope of collecting additional punitive damages if he were able to retain his sizeable compensatory judgment. This was also, we assume, evident to the Court of Appeals, for, in denying Weisman’s motion to reconsider the amendment of its mandate, it had before it and tacitly rejected the same argument.

Evidentiary Sufficiency Weisman’s second argument is premised on the supposition that all that remains in this case are the two ⁴⁹⁷ misrepresentations remanded for retrial under the negligent misrepresentation count—that Weisman’s Toyota franchise was “stable,” when, at the time that statement was made, there was a significant risk of his losing it, and that Weisman had a basically amicable relationship with the then-manager of the distributorship, when, in fact, he did not. He assumes that, because the Court of Appeals declared that the other four representations at issue could not form the basis of liability for negligent misrepresentation, they also cannot form the basis of liability for fraud. He addresses with particularity only the two statements he regards as still viable. In urging that Connors “never proved his fraud claim,” Weisman now argues: “The evidence regarding the alleged misrepresentation concerning the Toyota franchise would not support a fraud verdict for two reasons.

First, the evidence at trial showed that Mr. Weisman’s characterization of the relationship was true. There was a favorable climate for franchise renewal, and the franchise was renewed in 1982 for five full years [citation omitted]. Second, there was no evidence in Connors’ hundreds of pages of testimony that he relied on Mr. Weisman’s characterization of the franchise relationship. The record is directly to the contrary.” 2 (Emphasis in original.) We find no merit in that argument, principally because the assumption upon which it rests is not correct.

We do not think that the fraud count is restricted to the two ⁴⁹⁸ misrepresentations left alive under the negligent misrepresentation count. In Martens Chevrolet v. Seney, 292 Md. 328, 333 , 439 A.2d 534 (1982), the Court held that “[t]he critical element of the tort of deceit [fraud] that distinguishes it from others arising from false representation is scienter on the part of the defendant—intent to deceive the other party.” Thus, confirming earlier pronouncements, the Court iterated that “a misrepresentation believed by the speaker to be true, though induced by his ignorance or negligence, will not sustain an action for deceit.” Id. at 334 , 439 A.2d 534 , quoting from Donnelly v. Baltimore Trust & Guarantee Co., 102 Md. 1, 13 , 61 A. 301 (1905). The Martens Chevrolet Court did observe, however, that “[n]othing prohibits a plaintiff from pleading both deceit and negligent misrepresentation in one declaration and then relying on the same nucleus of facts in an attempt to satisfy the differing burdens of proof on these alternate claims.” (Emphasis added.) 292 Md. at 337 , 439 A.2d 534 . That, of course, was precisely what Connors sought to do.

As noted by the Court of Appeals in its Weisman Opinion, 312 Md. at 455 , 540 A.2d 783 : “As to all six of the alleged misrepresentations involved in the tort counts, Connors’ evidence at trial was principally directed to establishing that they were fraudulently made—that Weisman purposely misstated his actual intentions and expectations, believing one thing and deliberately saying another to induce Connors to leave Ford and join FWC.” (Emphasis added.) The Court recounted, however, that “[i]n rejecting this claim, and finding Weisman liable under the negligent misrepresentation count, the jury necessarily concluded that Weisman’s representations were not fraudulent but instead had been negligently made.” Id. The problem with that conclusion, said the Court at 456, was that: ⁴⁹⁹ “As to the first four alleged misrepresentations, there was no evidence that Weisman meant, but mistakenly failed, to communicate intentions or expectations other than those that he did communicate. In other words, there was no legally sufficient evidence from which the jury could have drawn a rational inference that Weisman, during his two precontractual meetings with Connors, mistakenly expressed intentions or expectations which were at variance with his true state of mind at the time the representations were made. Demonstrative of the absence of mistake on Weisman’s part is the fact that each of these representations