Opinion
NO. 2010-CA-001258-MR
08-31-2012
RAY PENNINGTON APPELLANT v. WHEELER AND CLEVENGER OIL COMPANY APPELLEES
BRIEFS FOR APPELLANT: Paul D. Deaton Paintsville, Kentucky BRIEF FOR APPELLEES: Nelson T. Sparks Louisa, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM JOHNSON CIRCUIT COURT
HONORABLE JOHN DAVID PRESTON, JUDGE
ACTION NO. 05-CI-00305
OPINION
VACATING AND REMANDING
BEFORE: ACREE, CHIEF JUDGE; STUMBO, JUDGE; LAMBERT, SENIOR JUDGE. ACREE, CHIEF JUDGE: Ray Pennington appeals a jury verdict and judgment ordering him to pay $236,000 in damages to the plaintiff, Wheeler and Clevenger Oil Co. (hereinafter Wheeler), for Pennington's breach of a contract granting Wheeler the right of first refusal to lease Pennington's convenience store. In support of his appeal, Pennington asserts two claims of error: (1) that the jury's award was not supported by the evidence, and (2) that the circuit court improperly declined to instruct the jury on the plaintiff's duty to mitigate its damages. Finding the jury ignored its instruction to award damages based upon Wheeler's lost profits, we vacate the judgment and remand for a new trial. Facts and procedure
Senior Judge Joseph E. Lambert sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statute (KRS) 21.580.
This dispute is not new to the Court of Appeals. The facts and procedure were recounted in a prior opinion by a different panel of this Court. They are as follows:
Wheeler is a wholesale supplier of gasoline products. On September 22, 2004, it entered into a contract with Stephen and Margie Ramey (the Rameys), who operated a Citgo Food Market in Johnson County, Kentucky, under a lease with Ray Pennington. The Wheeler-Ramey agreement provided that the Rameys would purchase wholesale gasoline exclusively from Wheeler.Wheeler and Clevenger Oil Co. v. Pennington, 2008-CA-000581-MR, 2009 WL 792736 (Ky. App. Mar. 27, 2009), review denied (Oct. 21, 2009).
Shortly before entering into the agreement with the Rameys, Wheeler entered into a contract with Pennington called "First Right of Refusal to Lease and Owner's Consent and Waiver." This agreement provided that if the Rameys no longer operated the Citgo Food Market, Wheeler would have the right of first refusal to lease or purchase the Citgo Food Market.
In June 2005, the Rameys terminated their lease with Pennington, which triggered . . . Wheeler's right of first refusal to lease or purchase the Citgo Food Market. Wheeler and Pennington entered into negotiations to that end, but were unable to reach an agreement. Thereafter, Pennington leased the business to Bob Trador who operated it under the name Tobacco Max.
Wheeler filed [suit] against Pennington in Johnson Circuit Court on August 5, 2005, setting out a breach of contract claim. Wheeler alleged that Pennington violated the terms of the Wheeler-Pennington agreement by failing to allow Wheeler to accept the lease terms offered to Trador, thus violating the "First Right of Refusal" agreement.
The matter proceeded in Johnson Circuit Court and a jury trial was conducted on January 28, 2008. Wheeler produced the testimony of Mark Clevenger-the vice president of Wheeler and Clevenger Oil Company-who opined that Wheeler sustained damages in the amount of $162,968.64 over a projected lease period of 32 months. Pennington testified that his agreement with Trador did not constitute a lease, and that it was merely a month-to-month agreement to keep the business in operation until a lease could be negotiated with Wheeler.
At the close of the evidence, Wheeler moved for a directed verdict on the issue of liability, which was granted and so entered by the court. The matter went before the jury on the sole issue of damages, and thereafter the jury returned an award in favor of Wheeler in the amount of $10.00. Wheeler's motion for a new trial arising from the insufficiency of the award was denied and this appeal followed.
Wheeler ... raises one claim of error, to wit, that the circuit court erred in denying its motion for a new trial. As a basis for this argument, Wheeler notes that the sole evidence adduced at trial on the question of damages was Clevenger's testimony that Wheeler sustained damages in the amount of $162,968.64 over a projected lease term of 32 months. Wheeler points out that Pennington tendered no proof that the damages were in any amount other than that which Wheeler alleged. According to Wheeler, since the proof was uncontroverted on the issue of damages, the jury had no basis in the law or the facts to award Wheeler the sum of $10.00 in damages. Wheeler argues that the circuit court erred in failing to so rule and that it is entitled to have the judgment reversed
and remanded for a new trial on the sole issue of damages. In response, Pennington maintains that the jury merely carried out its proper role as fact finder and rejected Clevenger's testimony as non-persuasive.
The Court went on to conclude that in awarding Wheeler only ten dollars, the jury had ignored uncontroverted evidence that Wheeler had incurred damages in the amount of $162,968.64. Accordingly, the matter was remanded to the circuit court for a new trial on the issue of damages.
Following the second trial, a jury awarded Wheeler $236,000. Pennington appealed. The jury's verdict was not supported by the evidence
This Court must give considerable deference to a jury's award of damages:
The amount of damages is a dispute left to the sound discretion of the jury, and its determination should not be set aside merely because we would have reached a different conclusion. If the verdict bears any reasonable relationship to the evidence of loss suffered, it is the duty of the trial court and this Court not to disturb the jury's assessment of damages.Hazelwood v. Beauchamp, 766 S.W.2d 439, 440 (Ky. App. 1989) (citing Davis v. Graviss 672 S.W.2d 928, (1984), overruled on other grounds by Sand Hill Energy, Inc. v. Ford Motor Co., 83 S.W.3d 483, 493-95 (Ky. 2002)). Accordingly, we will not reverse a jury's award of damages unless it was clearly erroneous. See Miller v. Swift, 42 S.W.3d 599, 601 (Ky. 2001).
Sand Hill was later vacated by Ford Motor Co. v. Estate of Smith, 538 U.S. 1028, 123 S.Ct. 2072, 155 L.Ed.2d 1056 (2003).
An award of damages is clearly erroneous if it is not supported by substantial evidence. Owens-Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998) (citations omitted). Substantial evidence, in turn, is defined as "evidence of substance and relevant consequence having the fitness to induce conviction in the minds of reasonable [people]." Id. To determine whether substantial evidence supported the verdict, we must examine the evidence presented at trial.
Wheeler presented evidence of the profits it purportedly lost by the testimony of Mark Clevenger, a co-owner of Wheeler. This testimony consisted of profit projections for the convenience store in question. His analysis was based upon the sales figures of the current store operator, Bob Trador, and Clevenger's own estimates. Wheeler also presented the lease agreement between Trador and Pennington which showed Trador was obligated to make rental payments of $4,000 per month, for a total of $236,000 over 59 months.
The admissibility of much of Wheeler's evidence is suspect, but neither party has raised that matter on appeal.
Pennington presented evidence that the store had actually not been profitable and argued that the oil company's damages were nonexistent. Trador testified that the store had yielded no profit during his tenancy, though he expected to earn profit in the future. Stephen Ramey, a prior lessee, testified that the store actually lost money during his occupancy.
In its closing argument, the oil company asked the jury not to award its alleged amount of lost profit, $583,013.81, but to simply assess the amount Pennington had received in rental payments from his current tenant, $236,000. As requested, the jury returned a verdict awarding the oil company $236,000.
Wheeler's attorney stated his client would be "happy" with that amount and thought it to be "fair."
On appeal, Pennington contends the jury's verdict was not based upon substantial evidence. This is so, he argues in part, because the proper measure of damages in a breach of contract action is the profit lost by the non-breaching party. Pennington believes the jury's verdict was based upon the improper assessment of damages and should therefore be reversed. We agree.
"It is well established in this jurisdiction that the measure of damages for breach of contract is that sum which will put the injured party into the same position he would have been in had the contract been performed." Perkins Motors, Inc. v. Autotruck Federal Credit Union, 607 S.W.2d 429, 430 (Ky. App. 1980) (citing Olive Hill Limestone Co. v. Gay-Coleman Construction Company, 244 Ky. 822, 51 S.W.2d 465 (1932)). Accordingly, damages for breach of contract may be measured by the non-breaching party's lost profits. See 22 Am. Jur. 2d Damages § 448 (2010). The jury was instructed accordingly as follows: "You will determine from the evidence and award [Wheeler] a sum of money that will fairly and reasonably compensate it for the loss of profit it sustained, directly as a result of the failure of [Pennington] to comply with the right of first refusal, not to exceed $583,013.81." Neither party expressed disagreement with this portion of the jury instructions or presented an alternate theory of recovery.
We acknowledge that there are other acceptable measures of damages in an action for breach, and we do not reach the issue of whether lost profit is truly the appropriate measure for breach of a contract for the right of first refusal. Neither party has put the matter before us.
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We conclude the jury disregarded the instruction because there was no evidence which supported an award of $236,000 as a measure of lost profit. The evidence was that Wheeler's lost profit was either $583,013.81 or $0. A jury is ordinarily permitted to award damages, in its discretion, which are less than the amount sought by the plaintiff, but more than the amount admitted by the defendant. See Hazelwood 766 S.W.2d at 440. A jury may be legitimately convinced - and the evidence may support the conviction - that neither party's alleged amount of damages is the proper award, and as a result settle on an amount of damages which neither party put forth. Such an award can be proper.
Here, however, the jury award cannot stand because in awarding the exact amount of rental payments, the jury plainly disregarded the instructions. Everyone agreed that Pennington had collected total rental payments of $236,000, Wheeler's attorney delivered a sympathetic plea to the jury to return only that amount, and the two amounts are identical. An appellant is entitled to a new trial when the verdict appears "to have been rendered under the influence of passion or prejudice, or in disregard of the evidence or instructions." Baker v. Davis, 438 S.W.2d 542, 544 (Ky. 1969). The jury disregarded the instruction to arrive at an award of damages based upon Wheeler's lost profit, and Pennington is entitled to a new trial.
Wheeler contends that in any event the law of the case doctrine requires that we affirm the verdict. Inman v. Inman., 648 S.W.2d 847, 849 (Ky. 2982). The oil wholesaler maintains that because this Court found the evidence in the first trial constituted "uncontested evidence of damages," we are now precluded from finding the verdict following the second trial is unsupported by the evidence.
As Pennington points out, however, that rule applies only if, "on a retrial after remand, there was no change in the issues or evidence[.]" Id. The doctrine does not apply here because there were significant differences in the evidence in the first trial and the one which is the subject of the instant appeal. Not only did Pennington present evidence that Wheeler's damages were small or nonexistent (and he presented no evidence of damages in the first trial), but Wheeler's evidence changed substantially, as well. As noted in our prior opinion, Wheeler first produced evidence that they had lost profit in the amount of $162,968.64. On remand, the oil wholesaler's evidence was that it was entitled to over $500,000 in damages. Applying the rule stated in Inman, supra, it is clear the law of the case doctrine does not prevent us from vacating the judgment. Pennington was not entitled to a mitigation of damages instruction
Pennington next asserts as error the circuit court's failure to instruct the jury regarding Wheeler's duty to mitigate its damages. In support of that argument, he correctly notes that the circuit court is required to instruct the jury on all theories supported by the evidence. Risen v. Pierce, 807 S.W.2d 945, 947 (Ky. 1991) (citation omitted). Wheeler responds that there was no duty to mitigate in this case, and that an instruction would have therefore been inappropriate.
Under Kentucky law, a party is required to mitigate his or her damages. So if a party introduces evidence that another party has failed properly to mitigate his or her damages, the jury should be given a failure-to-mitigate-damages instruction. A trial court's failure properly to instruct a jury is presumptively prejudicial. So the question becomes whether there was sufficient specific evidence introduced to support a mitigation of damages instruction.Morgan v. Scott, 291 S.W.3d 622, 640 (Ky. 2009), reh'g denied (Oct. 1, 2009).
The circuit court's only reason for denying Pennington's motion to instruct the jury on Wheeler's duty to mitigate was that Pennington's counsel did not have a proposed instruction to tender when he made the motion. That is not a proper basis for the circuit court's denial. Kentucky Rule of Civil Procedure 51(1) provides, "At any time before or during the trial, the court may direct the parties to tender written instructions. At the close of the evidence any party may move the court to instruct the jury on any matter appropriate to the issues in the action." There is no requirement that the movant produce a written jury instruction at the close of evidence. At that time, Pennington orally objected to the circuit court's jury instructions on the basis that it did not include an instruction on the duty to mitigate and requested the addition of such an instruction. That was all that was required.
Ultimately, however, we conclude the circuit court did not err in failing to instruct the jury as Pennington requested because Pennington was not entitled to an instruction on mitigation.
Pennington's argument is this: once he breached the contract, Wheeler was required to purchase one of several nearby gas stations that had gone out of business in order to make a profit and thereby mitigate its damages.
Under that theory it was Pennington's burden to present sufficient evidence to support a jury instruction on mitigation, and he failed to meet his burden. 22 Am.Jur.2d Damages, §908 (1988). Meeting his burden required that Pennington demonstrate that it was feasible and reasonable for Wheeler to buy or lease another similar convenience store, and to bring forth evidence that such an endeavor would have been profitable. Id. What Pennington actually showed at trial was that there were some convenience stores in the area that had gone out of business at one time, but that several of those had since reopened. It was not clear that those stores were available for purchase or lease at the time relevant to the dispute. While Pennington did elicit evidence from Clevenger that one closed convenience store was up for auction during the relevant time, Clevenger also testified that there was substantial competition for that store at the auction which drove up the price, and Pennington presented no evidence that purchasing it would have returned a profit. The evidence was therefore insufficient to support Pennington's requested instruction. Conclusion
We vacate the judgment of the Johnson Circuit Court awarding Wheeler $236,000 because the evidence does not support such a verdict and the jury ignored the circuit court's instructions in reaching it. We affirm the circuit court's denial of Pennington's motion for a jury instruction regarding Wheeler's obligation to mitigate damages. The matter is remanded for yet another trial on the issue of damages.
ALL CONCUR. BRIEFS FOR APPELLANT: Paul D. Deaton
Paintsville, Kentucky
BRIEF FOR APPELLEES: Nelson T. Sparks
Louisa, Kentucky