Hinkle v. Rockville Motor Co.
278 A.2d 42, 1971 Md. LEXIS 948, 262 Md. 502 (1971)
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Rule of Law:
In an action for fraudulent misrepresentation, a plaintiff is not limited to recovering 'out-of-pocket' losses but may elect to recover for the 'benefit of the bargain,' and such damages may be proven by evidence of the cost to repair the property to make it conform to the representation.
Facts:
- In January 1970, Donald Hinkle purchased a 1969 Ford Galaxie from Rockville Motor Company, Inc.
- Rockville represented to Hinkle at the time of sale that the automobile was new.
- On the day of the sale, Hinkle discovered the car had over 2,000 miles on it, and Rockville compensated him for his first payment in exchange for a release from further claims beyond the new car warranty.
- In April 1970, Hinkle discovered the car had previously been in a severe accident where it had been severed and welded back together.
- Hinkle alleged that Rockville knew about the accident and willfully concealed this fact.
- Hinkle produced expert testimony that it would cost $800 to repair the car to the 'new car condition' that was represented to him.
Procedural Posture:
- Donald Hinkle filed a suit for fraudulent misrepresentation against Rockville Motor Company, Inc. in the Circuit Court for Montgomery County, a trial court.
- At the close of Hinkle's case at trial, Rockville moved for a directed verdict.
- The trial court granted the directed verdict in favor of Rockville, finding Hinkle had failed to produce evidence of damages under the 'out-of-pocket' rule.
- Hinkle, as the appellant, appealed the judgment to the Court of Appeals of Maryland, the state's highest court.
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Issue:
In a fraud and deceit action, is evidence of the cost to repair an item to make it conform to the seller's representation a sufficient measure of damages to submit the case to a jury, even without evidence of the item's actual value at the time of sale?
Opinions:
Majority - Barnes, J.
Yes. In an action for fraudulent misrepresentation, evidence of the cost to repair an item to make it conform to the seller's representation is a sufficient measure of damages. A plaintiff is not restricted to the 'out-of-pocket' measure of damages and may instead seek 'benefit-of-the-bargain' damages. The court reviewed Maryland's case history and concluded that it has never rigidly adopted one measure of damages over the other, but instead has employed a flexible approach. The court explicitly adopted this 'flexibility theory,' holding that the 'cost to conform' (the $800 repair cost) is a permissible method for calculating benefit-of-the-bargain damages. Because Hinkle presented sufficient evidence of measurable damages under this theory, the trial court erred in granting a directed verdict for Rockville.
Analysis:
This case formally establishes the 'flexibility theory' for fraud damages in Maryland, explicitly rejecting a rigid adherence to the 'out-of-pocket' rule. By allowing plaintiffs to elect the 'benefit of the bargain' remedy, the court empowers defrauded parties to recover the value of what they were promised, not just what they lost. The decision's acceptance of 'cost to conform' as a valid measure of damages provides a practical and often more straightforward method of proof for plaintiffs, lowering the evidentiary bar that a strict 'actual value' calculation might impose. This holding aligns Maryland with a more modern, plaintiff-friendly approach to recovery in tort actions involving fraud.
