The former owner of an auto dealership was been awarded $65.4 million for fraud committed by the purchaser of the dealership. The judgment was also assessed against the bank that loaned the purchasers money to purchase the dealership.
Steve Rouse sold an automobile dealership to two persons who used Texas Capital Bank to obtain financing for the cars to be purchased and sold at the dealership. The two individual defendants persuaded Rouse to sign a guarantee for the new financing, commonly known as “floor plan financing.” Rouse signed the guarantee, hoping that doing so would ensure that he was fully paid for the purchase of the dealership.
The two individual defendants then undertook a vehicle kiting scheme in which they obtained stolen titles to vehicles and then faxed them to the bank to obtain a cash advances.
Why did the court hold the bank liable, and not just the two individual defendants? Because the bank’s floor plan audits showed repeated discrepancies, which the bank simply ignored month after month.
The jury awarded Plaintiff Rouse both compensatory and punitive damages.
To establish fraud in the State of Idaho, the following elements must be proved:
“(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his consequent and proximate injury.” Mitchell v. Siqueiros, 99 Idaho 396, 401, 582 P.2d 1074, 1079 (1978).
Faw v. Greenwood, 101 Idaho 387, 389, 613 P.2d 1338, 1340 (1980)