Hall v. Gage's Powersports, Inc.

2022 Ark. App. 406, 654 S.W.3d 353

• Court: Court of Appeals of Arkansas
• Decided: October 19, 2022
• Status: Published

Opinion

Cite as 2022 Ark. App. 406 ARKANSAS COURT OF APPEALS DIVISION IV No. CV-21-123

Opinion Delivered October 19, 2022 MAGGIE HALL, ADMINISTRATRIX OF THE ESTATE OF BRENDA DELL APPEAL FROM THE BOONE COUNTY ALLBRIGHT, DECEASED CIRCUIT COURT APPELLANT [NO. 05CV-19-181]

V. HONORABLE ANDREW S. BAILEY, JUDGE GAGE’S POWERSPORTS, INC. APPELLEE AFFIRMED

N. MARK KLAPPENBACH, Judge

Maggie Hall, administratrix of the estate of Brenda Dell Allbright, deceased, appeals from

the order of the Boone County Circuit Court granting summary judgment to appellee Gage’s

Powersports, Inc. We affirm.

In August 2018, Brenda Allbright went to Gage’s with her son and selected a Honda

Rebel motorcycle she wished to purchase. Allbright wanted to finance the purchase, but her

credit application was denied. Allbright then asked her brother, Louis Hall, to cosign the loan

for her. On August 24, 2018, Louis signed a “notice to co-signer/guarantor” and submitted a

credit application that was ultimately approved. On August 27, Allbright signed the bill of sale

and completed the purchase of the motorcycle. The bill of sale also contains the signatures of

Gage’s employee Kristy Clayborn and Louis, although Clayborn and Louis agree that Louis was not present on August 27.1 Allbright drove the motorcycle off the lot and shortly thereafter was

in a one-vehicle accident. Allbright died from her injuries the next day.

Maggie Hall, Allbright’s mother and administratrix of her estate, filed suit against Gage’s

alleging negligent entrustment, negligent supervision, fraud, and wrongful death.2 Maggie

claimed that Clayborn knew or should have known that Allbright was not competent to operate

a motorcycle as evidenced by the lack of a motorcycle endorsement on her driver’s license and

by her mental disease or defect, specifically schizophrenia. Maggie alleged that Louis should

have been required to cosign the contract on August 27 before Gage’s gave Allbright possession

of the motorcycle, and had Louis been required to appear and sign the contract, he would have

prevented Allbright from driving the motorcycle from the dealership. Maggie alleged that Gage’s

negligently gave Allbright possession of the motorcycle, that Gage’s negligently failed to train

and supervise Clayborn to ensure that documents were properly executed to complete the sale,

that Clayborn was negligent in conducting the transaction, and that Clayborn falsely represented

that a cosigner was needed when, in fact, the transaction was completed without Louis.

Gage’s filed a motion for summary judgment supported by excerpts from Clayborn’s and

Louis’s depositions. Gage’s argued that it was entitled to summary judgment on Maggie’s

negligent-entrustment claim because (1) negligent entrustment cannot be a first-party claim; (2)

1 Clayborn testified that there was another bill of sale that Louis signed at a different time for just the motorcycle, and Allbright added the extended service contract on August 27 as reflected on the bill of sale in evidence. Allbright, but not Louis, also signed a retail installment sale contract. 2 The operative complaint at the time the circuit court entered judgment was a second amended complaint that was filed after Gage’s motion for summary judgment had been filed.

2 a seller is not liable for negligent entrustment where it has no right to control the property; and

(3) Allbright was not incompetent, and even assuming she was, Gage’s had no reason to suspect

she was incompetent. Gage’s argued that Maggie could not prove the negligent-training claim

because in selling the motorcycle to Allbright, Gage’s employees adhered to the law, which

required that Allbright be over the age of sixteen, but did not require that she have a motorcycle

endorsement on her driver’s license.3 Gage’s alleged that Maggie could not sustain a claim for

fraud because Gage’s did not make a false representation of material fact. The circuit court

granted Gage’s motion for summary judgment on all the claims.

Our standard of review for summary-judgment cases is well established. Ponder v. Gorman,

94 Ark. App. 159, 227 S.W.3d 428 (2006). Summary judgment should be granted only when it

is clear that there are no genuine issues of material fact to be litigated, and the moving party is

entitled to judgment as a matter of law. Id. The purpose of summary judgment is not to try the

issues but to determine whether there are any issues to be tried. Id. Once the moving party has

established a prima facie entitlement to summary judgment, the opposing party must meet proof

with proof and demonstrate the existence of a material issue of fact. Id. On appellate review,

we determine if summary judgment was appropriate by deciding whether the evidentiary items

presented by the moving party in support of the motion leave a material fact unanswered. Id.

We view the evidence in the light most favorable to the party against whom the motion was filed,

resolving all doubts and inferences against the moving party. Id. Our review focuses not only

on the pleadings but also on the affidavits and other documents filed by the parties. Id.

3 Allbright was in her fifties.

3 I. First-Party Negligent Entrustment

The elements of negligent entrustment are as follows: (1) the entrustee was incompetent,

inexperienced, or reckless; (2) the entrustor knew or had reason to know of the entrustee’s

conditions or proclivities; (3) there was an entrustment of the chattel; (4) the entrustment created

an appreciable risk of harm to the plaintiff and a relational duty on the part of the defendant;

and (5) the harm to the plaintiff was proximately or legally caused by the negligence of the

defendant. Pace v. Davis, 2012 Ark. App. 193, 394 S.W.3d 859. Negligent-entrustment cases

are generally brought by third parties who were injured by the entrustee’s negligence. The parties

here agree that Arkansas has not, to this point, recognized a claim for first-party negligent

entrustment, which is a cause of action lying with the entrustee himself. The circuit court did

not decide whether such a cause of action exists but instead found that there was no genuine

issue of material fact as to whether Gage’s knew or had reason to know of Allbright’s

incompetence, inexperience, or recklessness with regard to the operation of a motorcycle.

In arguing that Gage’s knew or should have known that Allbright was incompetent to

operate the motorcycle, Maggie relies heavily on the affidavit of Dr. James Hawk. According to

Dr. Hawk, he was Allbright’s general practice physician “from one to four months between 2015

and 2017.”4 He stated that he concurred in Allbright’s prior diagnosis of schizophrenia and that

Allbright “would not appreciate the risk of riding a motorcycle with no experience in doing so.

Because of her disorder she did not appreciate risks as a normal individual would.” Dr. Hawk

also stated that “[a]ny person who did not suffer from cognitive deficits would recognize Brenda

4 Dr. Hawk said that Allbright did part-time custodial work in his building during this same time period.

4 Allbright suffered from a mental disorder after spending a few minutes with her.” Maggie argues

that Allbright was around Clayborn for more than just a few minutes; thus, Clayborn should

have noticed that Allbright “suffered from a mental disability that could influence her ability to

appreciate the risk of operating a motorcycle.” Maggie argues that the fact that Allbright’s

driver’s license lacked a motorcycle endorsement should have been an additional factor putting

Gage’s on notice that she was incompetent to operate a motorcycle.

According to the deposition testimony of Louis and Maggie, Allbright regularly drove a

car and drove with her grandchildren in the car. Louis had no knowledge of her having any

accidents. When asked about signs of her mental illness, Maggie said that Allbright “said things

that you didn’t understand,” and Louis said that she would stay in her cabin for a few days and

want to be left alone. Louis acknowledged that he did not tell anyone at Gage’s that Allbright

had a mental-health condition that should preclude her from operating a motorcycle or that he

did not want Allbright to be given possession of the motorcycle. Louis said that he did not

observe Allbright doing anything unusual at Gage’s. Although both Maggie and Louis said they

had no knowledge of Allbright ever operating a motorcycle before, Gage’s mechanic, George

Kelley, testified that Allbright told him that she used to own a Goldwing motorcycle. Clayborn

testified that Louis said “this would be interesting” regarding Allbright’s intended purchase.

When Clayborn questioned what he meant, he allegedly responded, “No, she will be fine; she

had a Goldwing.”

Maggie’s argument that Dr. Hawk stated that others would be able to tell that Allbright

suffered from a mental disorder that would influence her ability to operate a motorcycle

combines two of Dr. Hawk’s statements. Dr. Hawk stated separately that Allbright would not

5 appreciate the risk of riding a motorcycle and that any person would recognize that she suffered

from a mental disorder. Dr. Hawk’s affidavit does not establish that any person would recognize

that Allbright would not appreciate the risk of riding a motorcycle. The circuit court recognized

this distinction in finding as follows:

Dr. Hawk’s sworn statement does not contradict other testimony provided herein. There is no dispute Ms. Allbright suffered from a mental disorder, and this certainly may have caused her to not understand the risks associated with driving a motorcycle. However, there is no evidence Defendant could or should have known of Ms. Allbright’s inexperience with motorcycles, or the effect of her mental disorder on her ability to appreciate the risks of driving one.

We agree with the circuit court that Maggie failed to meet proof with proof regarding evidence

that Gage’s knew or should have known that Allbright was incompetent to operate a motorcycle.

In a claim for negligent entrustment, the driver’s incompetence and lack of capacity in

operating the vehicle must be established first. See Ponder, supra. Accordingly, we find no error

in the court’s order granting summary judgment on negligent entrustment.

II. Negligent Supervision

Under the theory of negligent supervision, employers are subject to direct liability for the

negligent supervision of employees when third parties are injured as a result of the tortious acts

of employees. Addington v. Wal-Mart Stores, Inc., 81 Ark. App. 441, 105 S.W.3d 369 (2003). The

employer’s liability rests upon proof that the employer knew or, through the exercise of ordinary

care, should have known that the employee’s conduct would subject third parties to an

unreasonable risk of harm. Id. As with any other negligence claim, to prove negligent

supervision, a plaintiff must show that the employer’s conduct was a proximate cause of the

injury and that the harm to third parties was foreseeable. Id. It is not necessary that the employer

6 foresee the particular injury that occurred, only that he or she reasonably foresee an appreciable

risk of harm to others. Id.

The circuit court found that Maggie had failed to offer proof that any injury was

foreseeable as a result of Clayborn’s paperwork errors because there was no genuine issue of

material fact that either Gage’s or Clayborn knew or should have known that Allbright was

incompetent to operate a motorcycle. Maggie argues that Clayborn erroneously thought the

“notice to co-signer” made Louis liable; failed to require Louis to sign the retail installment

contract and bill of sale; put the wrong length of employment and length of residency on Louis’s

credit application; and forged Louis’s name or allowed it to be forged on the bill of sale. Maggie

contends that Gage’s should have known that Clayborn was not executing the proper paperwork

to complete the sale and that incompetent and inexperienced people were taking possession of

motorcycles.

Gage’s argues that Maggie ignores the fact that the paperwork errors are only allegedly

relevant because of Allbright’s mental condition. We agree. Because there was no evidence

putting Gage’s on notice that Allbright was incompetent, there is no proof that it could have

known that paperwork errors would subject others to an unreasonable risk of harm.

Accordingly, summary judgment on the claim of negligent supervision was appropriate. Maggie

also argues that Gage’s is liable for general negligence because Clayborn’s paperwork errors were

made in the course and scope of her employment; however, Maggie has still failed to prove

foreseeability.

III. Fraud

7 The elements of fraud are (1) a false representation of a material fact; (2) knowledge that

the representation is false or that there is insufficient evidence upon which to make the

representation; (3) intent to induce action or inaction in reliance upon the representation; (4)

justifiable reliance on the representation; and (5) damage suffered as a result of the reliance.

Jackson v. Smith, 2010 Ark. App. 681, 380 S.W.3d 443. Constructive fraud has been defined as

a breach of a legal or equitable duty, which, irrespective of the moral guilt of the fraudfeasor,

the law declares to be fraudulent because of its tendency to deceive others. Id.

The circuit court found that, according to Maggie’s response to the summary-judgment

motion, her fraud claim was based on the allegation that Clayborn made a false representation

to Louis that Allbright needed a cosigner when the transaction was ultimately completed without

Louis cosigning. The circuit court found, however, that it was undisputed that Allbright’s

attempt to secure credit on her own was denied, and it was only approved with the addition of

Louis’s credit application as cosigner. On appeal, Maggie argues that the circuit court

misinterpreted the fraud argument and that Clayborn’s misrepresentation to Allbright was that

she knew how to complete the transaction and would properly complete the transaction with a

cosigner. Gage’s argues that Maggie fails to cite any evidence in the record that Clayborn ever

made such an affirmative representation.

Maggie alleged in her second-amended complaint that Clayborn “falsely represented that

a co-signer/guarantor was needed for the decedent to purchase the motorcycle when she asked

decedent’s brother to sign the notice to co-signer/guarantor.” As the circuit court found, the

transaction was only able to go forward with the addition of Louis’s credit application. Thus,

this representation was not false. The financing was approved with Louis as the cosigner;

8 whether the paperwork was executed in such a way that actually made him liable on the debt is,

as the circuit court found, a separate issue. Even if Maggie had alleged in her complaint that

Clayborn made a false representation regarding properly completing the transaction, we agree

with Gage’s that Maggie has failed to cite any evidence in the record that Clayborn ever made

such a representation to Allbright.

IV. Wrongful Death

The circuit court found that an action for wrongful death “is derivative in nature from

the original tort, and where the underlying tort action is no longer preserved, the wrongful death

action is barred as well.” Brown v. Pine Bluff Nursing Home, 359 Ark. 471, 475, 199 S.W.3d 45,

48 (2004). Maggie argues that because there is a genuine dispute as to the above claims, the

summary judgment on the claim for wrongful death should also be reversed. Because we have

found that the above claims were properly dismissed, the circuit court’s dismissal of the

wrongful-death claim is also affirmed.

Affirmed.

VIRDEN and WHITEAKER, JJ., agree.

Jeff Slaton P.A., by: Jeff Slaton, for appellant.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: Stuart P. Miller, Lindsey C.

Vechik, and Colt D. Galloway, for appellee.