United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 03-2128
___________
Chae Kon Chong, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Roscoe Parker; Rick A. Parker; *
Wood and Huston Bank, *
*
Appellees. *
___________
Submitted: January 16, 2004
Filed: March 9, 2004
___________
Before WOLLMAN, MORRIS SHEPPARD ARNOLD, and COLLOTON, Circuit
Judges.
___________
MORRIS SHEPPARD ARNOLD, Circuit Judge.
Chae Kon Chong appeals two rulings entered against him in his action against
Rick Parker (Rick), Roscoe Parker (Mr. Parker), and Wood and Huston Bank. The
district court granted summary judgment to the bank and, in the trial involving the
Parkers, refused to submit punitive damages to the jury. We affirm the summary
judgment and reverse and remand with respect to the matter of punitive damages.
I.
This case arises out of the sale of a car by Mr. Parker for his son, Rick, to
Mr. Chong for the use of his daughter, Sunhee. The sale was conducted at the bank,
which was Mr. Parker's place of employment. At the time of the sale, Mr. Chong did
not speak or understand English, and his daughter discussed the car's history and
negotiated the terms of the sale with Mr. Parker. Rick had previously informed
Mr. Parker that the vehicle had been declared salvage following an accident involving
the car's original owner, but Mr. Parker misrepresented to Sunhee (and thus to
Mr. Chong) that the car had not been in any accidents. When the car began
malfunctioning, Sunhee learned from a mechanic that the car had been rebuilt.
Through the internet, she found out that the car's history included a salvage title.
Mr. Chong sued the Parkers and the bank for common-law fraud and violations
of the Federal Odometer Act, see 49 U.S.C. §§ 32701-32711, and Missouri's
Merchandising Practices Act (MMPA), see Mo. Rev. Stat. §§ 407.010-407.307. The
district court granted the bank summary judgment on the claims against it. A jury
found for the Parkers on the Federal Odometer Act claim but could not reach a verdict
on the common-law fraud or MMPA claims. A second trial was conducted on the
MMPA claim against the Parkers; the jury found for Mr. Chong and awarded him
$2000 in actual damages. The trial court refused to submit punitive damages to the
jury.
II.
Mr. Chong alleged in his complaint that the bank participated in Mr. Parker's
fraudulent misrepresentations about the car. The car was parked in the bank's parking
lot with a "For Sale" sign on it when Mr. Chong first saw it and inquired about taking
a test drive. While Sunhee was aware that Mr. Parker (and not the bank) was selling
the car, Mr. Chong believed that the bank owned it. Mr. Parker negotiated the terms
of sale with Sunhee, and Mr. Chong signed the documents pertaining to the purchase
-2-
of the car at the bank. Mr. Parker also secured a car loan for Mr. Chong from the
bank to pay for the car.
While all these activities took place at the bank, there is no evidence that the
bank participated in the fraud. Mr. Chong's daughter and translator, Sunhee, knew
that the bank was not selling the car. Mr. Parker specifically told Sunhee that he was
selling the car for his son, but Sunhee did not believe that this information was
important enough to pass on to her father before he bought the car. Sunhee was
aware that Mr. Parker was speaking for himself and not for his employer, which had
no relationship with the car.
Mr. Chong argues that even though his mistake about the car seller's identity
was the result of his daughter's failure to inform him and not due to any
misrepresentation by Mr. Parker or the bank, the bank still benefitted from
Mr. Parker’s fraud through the interest payments on the loan and thus participated in
the fraud. The loan documents, however, were filled out after the sale was complete.
The loan was an entirely separate transaction from the sale of the car, and there was
no misrepresentation within the loan documents. If anything, the bank was injured
by the use of the car as collateral because the car's selling price (and thus the loan
amount) was too high due to Mr. Parker's misrepresentation. Mr. Parker's fraud had
the potential to injure the bank as well as Mr. Chong.
Mr. Chong maintains that "a party not actually making the fraudulent
representation is liable if he accepted the benefits of the transaction and had either
actual or constructive knowledge at the time of the fraud, or at the time he accepted
the benefits, that fraud had been committed." Fallert Tool & Eng'g Co. v. McClain,
579 S.W.2d 751, 756 (Mo. Ct. App. 1979). But there is no evidence here that the
bank had actual knowledge of Mr. Parker's misrepresentation, nor could the fraud be
imputed to the bank under Missouri agency law. " 'While a corporation ordinarily is
bound by the knowledge of its agents ..., the agent's knowledge of his own
-3-
unauthorized act, not brought home to the authorized corporate board, officer or
agent, cannot be imputed to the corporation.' " Motor Transp. Springfield v. Orval
Davis Tire Co., 585 S.W.2d 195, 202 (Mo. Ct. App. 1979) (quoting Trice v.
Lancaster, 270 S.W.2d 519, 524 (Mo. Ct. App. 1954). The bank did not authorize
Mr. Parker to defraud Mr. Chong or even to sell his son's car at the bank during
business hours. Mr. Parker acted only on his own behalf, outside the scope of his
employment, and extended no benefits of his fraud to the bank. The district court
therefore did not err in granting the bank summary judgment.
III.
Mr. Chong also appeals the trial court's refusal to submit the issue of punitive
damages to the jury. Under the MMPA, "[t]he court may, in its discretion, award
punitive damages" against defendants who employ fraudulent selling practices. Mo.
Rev. Stat. § 407.025.1. Our case law is clear that this language does not allow a
judge (as opposed to a jury) in a jury trial in federal court to fix the amount of
punitive damages awards, as the Parkers mistakenly argue. See Grabinski v. Blue
Springs Ford Sales, Inc., 136 F.3d 565, 571 (8th Cir. 1998).
To determine whether the trial court erred by refusing to submit punitive
damages to the jury, we must apply Missouri law. Only outrageous conduct
stemming from an "evil motive or reckless indifference" can give rise to an award of
punitive damages. Burnett v. Griffith, 769 S.W.2d 780, 789 (Mo. 1989). "In
reviewing the submissibility of the issue of punitive damages, we review the evidence
in the light most favorable to submissibility." Carpenter v. Chrysler Corp.,
853 S.W.2d 346, 364 (Mo. Ct. App. 1993).
In Carpenter, the trial court had refused to submit punitive damages to the jury
because it believed that the plaintiff had failed to present substantial evidence that the
defendant's conduct was outrageous. Id. The defendant had made repairs to a car
before the plaintiff-buyers took possession of it but did not inform the buyers. Id. at
-4-
353, 364. The appeals court reversed the trial court's refusal to submit the issue of
punitive damages, saying "that the jury could reasonably infer that [the defendant's]
actions were taken with reckless indifference to the rights of the [plaintiffs] or were
evil, motivated solely by [the defendant's] desire to make a sale regardless of the
repairs [that the defendant] had undertaken but had not disclosed." Id. at 364.
Mr. Chong's case is like Carpenter because, in both cases, the seller made
intentional misrepresentations in order to induce the buyer to pay a higher price than
he would have if he had known the truth. We believe, in fact, that Mr. Chong's case
is on all fours with Carpenter in every relevant particular. Mr. Parker lied about the
car's title and history to Sunhee and Mr. Chong to get a better price for the car. Since
Sunhee had asked Mr. Parker twice about whether the car had a salvage title or had
been involved in any accidents, it should have been apparent to him that the car's
accident history was important to Sunhee and her father. Mr. Parker misled Sunhee
and Mr. Chong to induce them to buy a car that they would otherwise not have
bought.
The Parkers argue that a punitive damages instruction would have been
inappropriate in the present case because, unlike the sellers in Carpenter, the Parkers
were unaware that the car that they were selling was in need of repair. In Moore v.
Courtesy Chevrolet, Inc., 854 S.W.2d 13, 13-14 (Mo. Ct. App. 1993), however, the
Missouri Court of Appeals reversed a trial court's refusal to submit punitive damages
to the jury where the plaintiffs were misled about who had driven a car previously,
even though "[t]he car never gave plaintiffs any trouble, and they ... never claimed it
was not a good car." The defendant did not need to disregard the plaintiffs' safety in
order to justify a punitive damages instruction. The court found that "the jury could
have believed that defendant intentionally misrepresented the history of the
automobile; that the misrepresentation was a material misrepresentation; that the
defendant made the misrepresentation with the purpose of inducing the unsuspecting
plaintiffs to buy the automobile and pay an excessive price." Id. at 14.
-5-
We believe that Mr. Chong has as strong an argument as the plaintiffs in Moore
had for submitting punitive damages to the jury because Sunhee asked about the car's
history at least twice and the question of whether a car is rebuilt relates directly to
whether it is safe and to its price. From the evidence presented at trial, "[t]he jury
could have inferred defendant[s'] evil motive or reckless indifference to the rights of
[Mr. Chong], and on that basis could have considered defendant[s'] conduct
outrageous." Id. (internal quotations omitted).
Lastly, the trial judge believed that "it [was] significant ... that neither
Mr. Roscoe Parker nor Mr. Rick Parker [was] generally in the business of buying and
selling cars, more specifically buying and selling salvage cars or rebuilt cars." The
MMPA, however, applies to anyone selling merchandise in Missouri; the statute does
not differentiate between merchants and non-merchants. While Mr. Parker's status
as a private seller suggests that a punitive damages award might not create the same
kind of deterrence as would a punitive damages award against a car dealership, the
purpose of the MMPA is to protect consumers from all fraudulent sellers, be they
merchants or not. Given Missouri case law, it is for the jury, not the court, to
determine whether punishing the Parkers with a punitive damages award is
appropriate where Mr. Parker was not a professional seller but disregarded
Mr. Chong's rights and interests.
On remand, the district court should try the matter of punitive damages and
submit it to the jury. Viewing the evidence in the light most favorable to
submissibility, a reasonable jury could conclude "that the defendants' conduct was
egregious and that it demonstrated a clear and disturbing disregard for [Mr. Chong's]
safety and … economic interests." See Grabinski v. Blue Springs Ford Sales, Inc.,
203 F.3d 1024, 1027 (8th Cir. 2000), cert. denied, 531 U.S. 825 (2000).
-6-
IV.
For the reasons stated, we affirm the district court's grant of summary judgment
in favor of the bank but reverse and remand with respect to its failure to submit the
matter of punitive damages to the jury.
______________________________
-7-