Singleton v. Pennington , 1977 Tex. App. LEXIS 3803 ( 1977 )

GUITTARD, Chief Justice.

The principal question on this appeal is whether the Deceptive Trade Practices Act, Texas Business and Commerce Code §§ 17.-41 to 17.63 (Vernon Supp.1977), imposes liability for an innocent misrepresentation by a seller of second-hand goods who is not in the business of selling such goods. We conclude that the Act is not limited to sales by persons in the business of selling. We further conclude that the findings of the trial court support plaintiff’s recovery under the Act.

The petition alleges that plaintiff bought a boat from defendant in reliance on a false representation that the engine was in good mechanical working condition. Plaintiff claims $500 actual and $1,000 exemplary damages.

After trial without a jury, the judge made findings of fact, which we summarize as follows. Defendant sold plaintiff a used boat, motor, and trailer which defendant had previously acquired for his personal use. Defendant had never sold a boat before and was not in the business of selling boats. Before the sale defendant made oral statements to plaintiff to the effect that the boat, motor, and trailer had just had $500 worth of work on it, making the boat and motor in “excellent condition,” “perfect condition,” and “just like new.” These were statements of material fact rather than merely statements of opinion or puffing. Defendant made the statements with the intent that they would be acted upon by plaintiff. They were false because the gear housing of the motor had been cracked and inadequately repaired. Defendant, however, did not know that the statements were false, and neither did he make them recklessly, because he had not experienced any difficulty with the motor after it had been repaired. Plaintiff relied on defendant’s statements and would not otherwise have purchased the boat, motor, and trailer. These statements were misleading and caused an unconscionable result. Within two months after the sale, the gear housing required repairs in the amount of $481.68 because at the time of the sale the boat was in inadequate condition for its intended use.

Before trial, plaintiff and defendant had stipulated to a $500 limitation on exemplary damages, if any should be recovered. The court found that plaintiff was entitled to recover three times the amount of his actual damages of $481.68 under the Deceptive Trade Practices Act, but that under the stipulation his recovery should be limited to the sum of plaintiff’s actual damages of $481.68 and exemplary damages to the stipulated limit of $500. Accordingly, the court found that plaintiff was entitled to recover total damages in the amount of $981.68 for violation of the Deceptive Trade Practices Act. The judge concluded that the plaintiff had failed to carry his burden of proving the elements of common-law fraud, but had carried his burden under the Deceptive Trade Practices Act. Accordingly, judgment was rendered for plaintiff for $981.68.

Defendant contends on this appeal that the Act does not apply to a seller who is not in the business of selling. He argues that such a construction is required by § 17.44 of the Act, which provides:

This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.

We cannot interpret this provision for liberal construction as sufficient in itself to restrict the scope of the Act to sales in the course of the seller’s regular business. In view of other provisions of the Act we conclude that it cannot reasonably be construed as so restricted. Section 17.46(a) declares unlawful “[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce.” The terms “trade” and “commerce” are not limited to transactions in the course of the seller’s regular business or occupation. On the contrary, § 17.45(6) broadly defines these terms as follows:

(6) “Trade” and “commerce” mean the advertising, offering for sale, sale, lease, or distribution of any good or service, of any property, tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value, wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this state.

No exemption is provided for sellers who are not in the business of selling, although other exemptions are provided by § 17.49. Section 17.50(a)(1) provides that a consumer may maintain an action if he has been adversely affected by “the use or employment by any person of an act or practice declared to be unlawful by § 17.46.” “Person” is defined in § 17.45(3) as “an individual, partnership, corporation, association, or other group, however organized.” We find no indication in any of this language of an intent to restrict the Act to sales by persons in the business of selling.

Defendant advances a number of policy reasons for not applying the Act to a person who sells at second hand goods previously acquired for his own use. Persuasive though these reasons may be, we can give them no weight because of the absence of any language in the Act that can reasonably be interpreted as evidencing such intent. Since we find no such language, we hold, reluctantly, that the Act is not so restricted.

By supplemental points appellant attacks the court’s findings that the representation in question “caused an unconscionable result.” The trial court apparently took the view that this finding brought the case within § 17.50(a)(3), which gives the consumer a right of action if adversely affected by “any unconscionable action or course of action by any person.” Defendant argues, in effect, that the court’s finding of “unconscionable result” is a legal conclusion and is inconsistent with the fact finding that the defendant did not know that the statements in question were false and did not make those statements recklessly because he had experienced no difficulty with the motor after it had been repaired.

We need not pass on these supplemental points because the findings support another ground of recovery that appellant has not attacked. Besides finding that defendant’s representations “caused an unconscionable result,” the court also found that they were “misleading,” that they were false, that plaintiff relied on them, and that plaintiff would not otherwise have purchased the boat, motor, and trailer. These findings bring the case within § 17.46(a), which declares unlawful “[f]alse, misleading, or deceptive practices in the conduct of any trade or commerce” (emphasis added). As we have already pointed out, the terms “trade” and “commerce” are defined in § 17.45(6) to apply to any sale of goods whether or not made in the course of the seller’s business. Thus the trial court was correct in holding that plaintiff had met his burden under the Act and would have been entitled to treble damages in the absence of the stipulation limiting recovery of exemplary damages to $500. Cf. Woods v. Littleton, 554 S.W.2d 662 (Tex.1977) (treble damages mandatory when violation of Act established).

In this connection the question has been raised that decisions construing the Federal Trade Commission Act support defendant’s interpretation of the Texas Deceptive Trade Practices Act, in view of § 17.46(c) of the Texas Act which provides:

“It is the intent of the legislature that in construing Subsection (a) of this section the courts to the extent possible will be guided by Subsection (b) of this section and the interpretations given by the Federal Trade Commission and federal courts to Section 5(a)(1) of the Federal Trade Commission Act [15 U.S.C.A. 45(a)(1)].”

The provision of the federal act referred to, § 5(a)(1), is as follows:

“Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.”

The decisions construing this provision of the federal act, as we view them, do not support the defendant’s contention because § 17.46(c) by its terms applies only to interpretation of § 17.46(a), whereas the main question here is interpretation of the definitions of “trade” and “commerce” in § 17.-45(6). The Federal Trade Commission Act has no comparable definition of these terms. The only definition of “commerce” in the Federal Act is that in § 4, 15 U.S. C.A. § 44 (1973), which defines this term as “commerce among the several States,” etc. The apparent purpose of this definition is to bring the Act within the powers of Congress under the Interstate Commerce Clause in article I, § 8, of the United States Constitution. Since the power of the Texas legislature over transactions in this state is not derived from the Federal Constitution, the Texas legislature had no occasion to limit the scope of the Texas Act to “commerce” as defined in the Federal Act. If the Texas legislature had intended the terms “trade” and “commerce” in § 17.46(a) to be limited by the scope of the Federal Act it would not have provided its own definitions of those terms in § 17.45(6).

This interpretation does not leave § 17.-46(c) altogether without meaning. We conclude that the intent was to refer to interpretations of the Federal Act for guidance in interpreting the phrase “[fjalse, misleading, or deceptive acts or practices” in § 17.46(a). In this connection, it may be noted that the particular provision of the Federal Act referred to, § 5(a)(1), has similar language declaring unlawful “unfair or deceptive acts or practices.” Evidently, it is the interpretation of this language by the Federal Trade Commission and federal courts that the Texas legislature has prescribed as a standard for the interpretation of § 17.46(a), along with the twenty illustrative examples of “false, misleading or deceptive practices” listed in § 17.46(b). A similar Massachusetts statute has been given such an interpretation by the highest court of that state. Commonwealth v. Decotis, 316 N.E.2d 748, 754 (Mass.1974).

We conclude that since the Federal Act contains no definition of “trade” or “commerce” comparable to the broad definition of those terms in § 17.45(6), our legislature did not intend that this broad definition should be limited by reference to interpretation of the Federal Act in § 17.46(c). Consequently, federal decisions limiting application of the Federal Act to persons engaged in the business of providing goods or services can have no application to this case.

Neither are we persuaded by the reasoning of the Supreme Court of Washington in Lightfoot v. MacDonald, 86 Wash.2d 331, 544 P.2d 88 (1976). That court did not hold that the similar statute of that state applies only to a defendant engaged in the business of providing goods or services, but rather that even if he is engaged in such a business (in that case, an attorney providing legal services), there is no violation if the only injury is to the individual plaintiff rather than to the public generally. Defendant in the present case does not urge such an interpretation of the Texas Act, and we consider such an interpretation untenable in view of § 17.50(a), which provides that a consumer “may maintain an action if he has been adversely affected” by any of the acts or practices declared unlawful by § 17.46, and also in view of § 17.50(b), which prescribes the remedies available to “each consumer who prevails” in such a suit. In our opinion, to hold, as did the Washington court, that none of the acts declared unlawful by § 17.46 afford ground for a private remedy because “no public interest would be served,” would be an unwarranted judicial invasion of legislature’s primary responsibility to determine the public interest and prescribe remedies for wrongs, both public and private.

We recognize the harshness of our holding that a person who sells second-hand goods previously purchased for his own use is liable for treble damages for an innocent representation. See Comment, “What Hath the Legislature Wrought? A Critique of the Deceptive Trade Practices Act as Amended in 1977,” 29 Baylor L.Rev. 526, 531 (1977). Harsh though it may be, it is not so absurd or illogical that the legislature may be presumed not to have intended such a result. The remedy of treble damages is Draconian, even as applied to a person engaged in the business of supplying goods and services, especially if he has not been charged with intentional deception. We have no authority, however, to restrict the statute according to our own notion of the public interest.

Affirmed.

AKIN, J., dissenting.