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DEMING v. BUCKLEY'S ART GALLERY

August 15, 1961

ROBERT O. DEMING, JR.,
v.
BUCKLEY'S ART GALLERY.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

On June 27, 1961, plaintiff filed his complaint, in which he alleged that he is a citizen of Kansas and the defendant is a corporation organized under Arkansas law, with its principal place of business in Hot Springs, and that the amount in controversy exceeded $10,000, exclusive of interest and costs.

Plaintiff further alleged:

    "2. On April 6, 1961, plaintiff was in defendant's
  place of business at Hot Springs and indicated an
  interest in purchasing a diamond ring. Such ring was
  represented as being a pure white stone and
  defendant's employee agreed that it would be
  auctioned on Saturday night, April 8, at which time
  plaintiff could bid. Plaintiff appeared for the
  auction and prior to beginning the auction L. Morse,
  acting on behalf of defendant, announced that the
  stone was a 4.20 carat white diamond; that it was a
  choice stone; and that it was the property of an
  estate in Reading, Pa.; that sale was expressly
  conditioned on the stone being worth the price paid;
  that the successful bidder was privileged to submit
  it to any competent jewelry appraiser and if the
  stone was not appraised at the value fixed by the
  price paid it could be returned and full refund would
  be given.
    "3. Plaintiff, relying on such representations, and
  on the condition of repurchase if appraisal showed
  less value than the price, purchased the ring for
  $6554.
    "4. The representations were false, defendant's
  employees were aware of such falsity, and were part
  of a plan to deceive and defraud plaintiff, in the
  following particulars: (a) the stone was not white,
  but dark yellow. It was not choice, but was poor
  brilliancy. It was not in good condition, but was
  scratched. (b) The stone was of materially less value
  than represented. (c) The condition of the sale;
  i.e., that appraisal by a competent jeweler would
  confirm value, with right of return, was breached by
  defendant. (d) The sale was in violation of
  Ark.Stat.Ann. Sec. 71-418 in that no statement
  setting out the color of the diamond was furnished
  plaintiff. Instead, defendant delivered to plaintiff
  a document styled `Diamond Guarantee Bond',
  reproduction of which is attached, which is not a
  bond but a document designed to mislead purchasers,
  merely setting

  forth an incomplete and false description of the
  article, failing to include the color of the stone or
  the weight of the two smaller stones.
    "5. Plaintiff alleges that the entire transaction,
  as herein described, is part of a plan to deceive and
  defraud and that defendant perpetrated such fraud on
  plaintiff by use of knowingly false statements and
  conditions made for the purpose of being relied on by
  plaintiff and relied on by him to his damage.
    "6. Upon discovering breach of the condition and
  the nature of the fraud, plaintiff attached the ring
  to a draft on defendant, notified defendant of his
  intention to rescind, and the draft was presented to
  defendant but not accepted. Plaintiff has repeatedly
  offered to return the ring for a refund of the price,
  but defendant has refused. [Emphasis added.]
    "Wherefore, plaintiff prays that the transaction be
  rescinded; that he recover the sum of $6554 as
  damages, upon return of the ring, and the sum of
  $5000 as punitive damages, for costs and all proper
  relief."

Simultaneously with the filing of the complaint, the plaintiff's attorney, Mr. Griffin Smith, submitted to the court a memorandum, in which he stated:

    "Since jurisdiction is dependent on a right to
  punitive damages, plaintiff anticipates the authority
  for recovery of such element should be demonstrated
  at the time the complaint is being filed. Arkansas
  authority is represented by Cummings v. Lord's Art
  Galleries, 302 S.W.2[d] 792, 227 Ark. 972. The
  transactions were, for practical purposes, identical,
  and punitive damages were sought and awarded in the
  sum of $2000. While the judgment was reversed on
  other grounds, the right to exemplary damages was
  apparently not questioned. This type activity is
  classed as `gross fraud' and falls within the rule
  allowing recovery of punitive damages as a result.
  Am.Jur., Vol. 15, p. 715, n. 20.
    "The remaining aspects of the action are contained
  in Pasternack v. Esskay Art Galleries, Inc. [D.C.] 90
  F.S[upp.] 849, which issued from this court and will
  not be reiterated."

On July 6, 1961, defendant answered, denying specifically that the plaintiff was a citizen of Kansas and that the amount in controversy exceeded $10,000, and further denied each and every material allegation contained in the complaint. On the same date defendant filed a motion to strike an alleged appraisal of the ring in question, having been attached as "Exhibit A" to the complaint, contending that such allegation was a violation of the hearsay evidence rule. The court sustained the motion.

In a letter to the attorneys, dated July 10, 1961, advising them of the action on the defendant's motion, the court raised the question of jurisdiction, and in the last two paragraphs of the letter stated:

    "The plaintiff further alleges that the entire
  transaction `is part of a plan to deceive and defraud
  and that defendant perpetrated such fraud on
  plaintiff by use of knowingly false statements and
  conditions made for the purpose of being relied on by
  plaintiff and relied on by him to his damage,' and
  therefore he is seeking to recover the sum of
  $5,000.00 as punitive damages, which sum, together
  with the sum of $6,554.00, affords the jurisdictional
  amount.
    "When the complaint was filed, Mr. Smith [the
  attorney for plaintiff], forwarded to me a memorandum
  in support of the jurisdiction, but at this time I
  have not had an opportunity to consider the
  jurisdictional question. However, I shall do so as
  soon as the business of the court permits, and in the
  meantime I suggest that if either of you desires to
  file any additional brief on

  the jurisdictional question, that you send same to me
  as soon as you may reasonably do so."

On July 20, 1961, the attorney for the defendant responded by letter, acknowledging receipt of the court's letter of July 10, and stated:

    "This is to advise you that I will raise no
  question or object to the jurisdiction of the court
  with respect to the amount of damages. I have
  researched this question on a minor degree and am
  satisfied that the claimed punitive damages can be
  tacked onto ...

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