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General Motors Acceptance Corp. v. Baymon

February 18, 1999

GENERAL MOTORS ACCEPTANCE CORPORATION
v.
MENOLA BAYMON



Before Prather, C.j., Banks And Roberts, JJ.

The opinion of the court was delivered by: Roberts, Justice

DATE OF JUDGMENT: 10/01/97

TRIAL JUDGE: HON. JANNIE M. LEWIS

COURT FROM WHICH APPEALED: HUMPHREYS COUNTY CIRCUIT COURT

NATURE OF THE CASE: CIVIL - TORTS - OTHER THAN PERSONAL INJURY AND PROPERTY DAMAGE

DISPOSITION: REVERSED AND REMANDED - 02/18/99

STATEMENT OF THE CASE

¶1. On September 20, 1995, the Appellee, Menola Baymon (hereinafter "Baymon"), sued the Appellant, General Motors Acceptance Corporation (hereinafter "GMAC"), in the Circuit Court of Humphreys County, Mississippi. Baymon asserted claims for breach of contract and fraud. Baymon claimed that GMAC violated its duty of good faith and fair dealing regarding the purchase of insurance for Baymon's car after she allowed her own insurance policy to lapse. In April 1996, the Complaint was amended to add GMAC employee Sharron Mitchell as a co-defendant and to add claims of fraud and fraudulent concealment and breach of fiduciary duties.

¶2. GMAC moved before trial to exclude evidence concerning the rate-setting method of Motorists Insurance Company (hereinafter "MIC"), a subsidiary of GMAC and the company from which GMAC purchased Baymon's auto insurance. GMAC argued that MIC's conduct was irrelevant to the issues in the case since MIC was not a defendant and MIC's rates had been subject to regulatory review and approval. The court granted GMAC's motion.

¶3. A five-day trial was held in June of 1997. At the close of Baymon's case, GMAC and Mitchell moved for a directed verdict on all counts, alleging that there was insufficient evidence to support Baymon's claims. The Defendants also moved for a mistrial as a remedy for the admission of improper evidence concerning MIC's rate-setting and suggesting that GMAC's insurance program targeted racial minorities. The court directed a verdict for Mitchell. The court also granted GMAC's motion for a directed verdict on damages for emotional distress, based on its view that Baymon's testimony concerning the threat of repossession was too equivocal to support such damages. However, the court denied GMAC's other motions.

¶4. Following the trial, the jury returned a verdict in favor of Baymon on all counts, awarding her $35,000 in compensatory damages, and punitive damages of $5,000,000. GMAC moved for a judgment notwithstanding the verdict, a new trial or for a remittitur of the damages awards, but was denied by the court. Aggrieved by the proceedings below, GMAC appeals to this Court raising the following issues:

I. THE TRIAL COURT ERRONEOUSLY DENIED GMAC'S MOTIONS FOR DIRECTED VERDICT OR FOR JUDGMENT NOTWITHSTANDING THE VERDICT.

A. GMAC DID NOT BREACH ITS CONTRACT WITH BAYMON.

B. GMAC DID NOT BREACH THE DUTY OF GOOD FAITH AND FAIR DEALING.

C. BAYMON FAILED TO ESTABLISH THE ELEMENTS OF HER FRAUD CLAIM.

D. BAYMON FAILED TO ESTABLISH HER FIDUCIARY DUTY CLAIM.

II. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY:

A. ALLOWING IRRELEVANT AND PREJUDICIAL TESTIMONY AND ARGUMENT SUGGESTING THAT GMAC'S USE OF COLLATERAL PROTECTION INSURANCE IS RACIALLY DISCRIMINATORY;

B. PERMITTING BAYMON'S EXPERT WITNESSES TO TESTIFY REGARDING MATTERS OUTSIDE THEIR AREAS OF EXPERTISE;

C. ADMITTING EVIDENCE CONCERNING THE REASONABLENESS OF THE RATES CHARGED AND THE PROFITS EARNED BY THE SELLER OF THE INSURANCE THAT GMAC PURCHASED TO COVER BAYMON'S CAR; AND

D. GIVING JURY INSTRUCTIONS NOS. 6, 7, 9, AND 10

III. THE AWARD OF COMPENSATORY DAMAGES WAS UNSUPPORTED BY THE EVIDENCE AND/OR GROSSLY EXCESSIVE.

IV. THE AWARD OF PUNITIVE DAMAGES WAS IMPROPER.

¶5. This Court finds that lower court was correct when it refused to grant GMAC's motion for a directed verdict or judgment notwithstanding the verdict, but only regarding the claim for breach of contract. On this issue, Baymon presented adequate evidence to support her claim upon which reasonable minds could have differed. However, the reversible errors committed by the trial Judge, and the excessive awards from the jury warrant a new trial. Therefore, this Court reverses the jury's decision and award below and remands this case for a new trial consistent with the findings in this opinion.

STATEMENT OF FACTS

¶6. In July of 1991, Menola Baymon bought a new Mitsubishi Galant from Regency Mitsubishi in Jackson, Mississippi. Baymon signed a retail instalment sale contract (which was subsequently assigned to GMAC) agreeing to make monthly payments of $395.42 over a period of five (5) years. Under the terms of the instalment contract, Baymon agreed to keep the car insured against loss or physical damage as long as any portion of her account remained unpaid. In the event that Baymon ceased to maintain insurance coverage on the vehicle, the instalment contract gave GMAC the right to purchase insurance and charge Baymon for the cost of that insurance plus a finance charge. Specifically, the instalment contract provided:

You agree to have physical damage insurance covering loss or damage to the vehicle for the term of this contract. At any time during the term of this contract, if you do not have physical damage insurance which covers both the interest of you and the Creditor in the vehicle, then the Creditor may buy it for you. If the Creditor does not buy physical damage insurance which covers both interests in the vehicle, it may, if it decides, buy insurance which covers only the creditor's interest.

The Creditor is under no obligation to buy any insurance, but may do so if it desires. If the Creditor buys either of these coverages, it will let you know what type it is and the charge you must pay. The charge will consist of the cost of the insurance and a finance charge, at the highest lawful contract rate. You agree to pay the charge in equal installments along with payments shown on the payment schedule.

The instalment contract also gave GMAC the right to repossess the car upon Baymon's breach.

¶7. Baymon conceded that she understood her obligation to maintain property damage insurance on her vehicle. She initially fulfilled that requirement by obtaining coverage from State Farm. However, due to alleged financial difficulties, Baymon let the State Farm policy lapse as of March 30, 1992 and purchased no other insurance.

¶8. Soon thereafter, Baymon began receiving notices from GMAC concerning the need to keep the vehicle insured. The first notice advised Baymon of the lapse and of her obligation to keep the vehicle insured. Furthermore, it informed her that GMAC would purchase collateral protection insurance (hereinafter "CPI"), if she did not renew her own policy, stated the premium for that coverage and encouraged her to get her own insurance.

¶9. Two (2) weeks later, a phone call was made to State Farm to determine whether coverage had been reinstated. Several weeks after the phone call, GMAC sent a second notice to Baymon, advising her that GMAC had purchased CPI. The letter included a three (3) page certificate explaining the terms of coverage, and disclosing the premium paid by GMAC and the effective date and termination date of the coverage. GMAC purchased one year of coverage from MIC, a subsidiary of GMAC, for the period of May 24, 1992, to May 24, 1993. GMAC paid the $1654 premium to MIC by check on August 28, 1992. GMAC claimed that the insurance it purchased was the most inexpensive policy available in Mississippi.

¶10. On September 1, 1992, GMAC sent Baymon a third notice confirming that they had purchased CPI for her car, disclosing the premium and coverage period, and notifying her of GMAC's intent to add the premium, plus a finance charge, to her monthly payments. Baymon testified that she called GMAC "once or twice" after receiving the notices. GMAC's records reflect that on September 15,1992, Baymon called GMAC and directed them to add the premium to her monthly car payments which increased the payments by about $44 to $439.64 per month.

¶11. In November of 1992, Baymon requested and received a 60-day extension in her payment schedule. In April 1993, a notice was sent to Baymon indicating that the initial CPI certificate would expire on May 24, 1993, and that GMAC would renew it for another twelve months at a cost of $836 unless she provided proof of her own coverage. When GMAC received no response from Baymon, GMAC paid the $836 premium to MIC for coverage from May 24, 1993 to May 24, 1994. On July 1, 1993, GMAC billed Baymon's account for the additional premium, increasing her monthly payment approximately $25 to $464.53 effective July 22, 1993. Before the second CPI policy expired, Baymon secured her own insurance. Accordingly, on March 28, 1994, GMAC retroactively canceled its insurance as of January 31, 1994 (the date Baymon obtained her own insurance), and credited Baymon's account with the return premium received from MIC. This reduced her monthly payments to $455.44.

¶12. On September 20, 1995, the Appellee, Menola Baymon (hereinafter "Baymon"), sued GMAC claiming that it breached its contract, breached its duty of good faith and fair dealing and breached its fiduciary duties. Baymon did not dispute that GMAC had a contractual right to purchase CPI when she allowed her coverage to lapse. However, Baymon claimed that the contract she entered into with GMAC provided that borrowers were responsible for reimbursing GMAC for its "cost" of procuring collateral protection insurance if and when a particular borrower failed to maintain her own insurance.

¶13. Baymon complained that GMAC's "cost" of CPI was improperly inflated by additional charges and instead amounted to a "premium." According to Baymon, the premium included three (3) unauthorized components: (1) a commission; (2) excessive and concealed profits; and (3) an administrative expense of tracking GMAC's loan portfolio. Baymon alleges that this "premium" amount far exceeded what it actually "cost" GMAC to obtain the coverage.

¶14. Baymon also alleged that GMAC committed fraud. Baymon claimed that GMAC should have informed her that MIC was its subsidiary. Additionally, although the right of repossession was included in the instalment contract, GMAC had a written policy never to repossess a borrower's vehicle for failure to pay the add-on insurance. Nonetheless, Baymon claimed that when she failed to pay the insurance portion of her monthly payment, GMAC repeatedly threatened her with the repossession of her car if she did not make the payment. As a result of the alleged harassment, Baymon also claimed that she suffered emotional distress.

¶15. GMAC denied all of Baymon's claims and moved for a judgment notwithstanding the verdict at the close of Baymon's case. GMAC also moved for a mistrial, alleging the admission of improper evidence and complaining that Baymon's counsel repeatedly suggested that members of racial minorities were most often the targets of CPI.

¶16. Following the trial, the jury returned a verdict in favor of Baymon on all counts, awarding her $35,000 in compensatory damages, and punitive damages of $5,000,000. GMAC moved for a judgment notwithstanding the verdict, a new trial or for a remittitur of the damages awards, but was denied by the court. Taking exception with the trial court's decision, GMAC raises the issues below.

DISCUSSION OF THE ISSUES

I. THE TRIAL COURT ERRONEOUSLY DENIED GMAC'S MOTIONS FOR DIRECTED VERDICT OR FOR JUDGMENT NOTWITHSTANDING THE VERDICT.

Standard of Review

ΒΆ17. In Steele v. Inn of Vicksburg, Inc., 697 So. 2d 373 (Miss. 1997), we held that our standards of review for a denial of a judgment notwithstanding the verdict and a directed verdict are ...


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