Opinion
No. 56993-7-I.
February 11, 2008.
Appeal from a judgment of the Superior Court for King County, No. 03-2-12600-4, Andrea A. Darvis, J., entered August 29, 2005.
Affirmed by unpublished opinion per Dwyer, J., concurred in by Becker and Cox, JJ.
Peter Yagi sued Ronald Miller on his own behalf and on behalf of Adroit Auto Services, Inc., an auto-glass repair business Yagi half-owned. A jury agreed with Yagi's claims that Miller had converted the assets of Adroit, and that Miller had tortiously interfered with Adroit's contractual relationship with Diamond Parking. The jury awarded Yagi $310,340 on the conversion claim and $62,500 on the tortious interference claim. On appeal, Miller does not challenge the jury's finding of liability, but argues that the jury could not legally have awarded the damages that it did award because Yagi failed to adduce sufficient evidence at trial to support the damage award. Finding ample evidence in the record to support the jury's award and finding no reason why the jury could not have believed that evidence, we affirm.
Facts
Yagi was approached by John Cunningham, who was seeking a business loan. Cunningham owned a small auto-glass rock-chip repair business in Monroe, Washington. Yagi had previous experience in the windshield replacement and rock-chip repair business. Cunningham and Yagi discussed entering into a rock-chip repair business together. Ultimately, Yagi and Cunningham agreed to begin a rock-chip repair business that operated out of a chain of oil and lube shops in Milwaukee, Wisconsin.
Yagi and Cunningham incorporated their business as Adroit Auto Services, Inc. Originally, Yagi agreed to invest $30,000 in exchange for a 25 percent interest in Adroit; Cunningham would own the other 75 percent of the company. Cunningham was to handle the daily operations in Milwaukee, while Yagi was to handle administrative matters from his office in Bellevue, Washington.
The Milwaukee venture was a failure. Expenses outpaced receipts both due to aggressive spending by Cunningham and to the delay in receiving payment from customers' insurance companies. Ultimately, the owner of the Milwaukee lube shops decided that the chain could offer the same service that Adroit was providing and that, thus, there was no further need for Adroit's presence. Following Adroit's failure in Milwaukee, Yagi and Cunningham relocated the business and its employees to Denver, Colorado, again working out of lube shops, with Cunningham managing day-to-day operations.
During this period, Adroit required significant additional cash investment, which was provided by Yagi. As a result of this additional investment, Yagi and Cunningham agreed to increase Yagi's ownership interest to 50 percent. Yagi ultimately personally expended or deferred compensation from Adroit in the amount of $176,774 in order to set up the business.
Discussions with a potential investor then convinced Yagi and Cunningham to shift their business plan. Yagi and Cunningham made contact with representatives of Diamond, believing that operating out of parking lots might provide a better opportunity to run the business profitably. Diamond was amenable to having Adroit operate out of Diamond facilities in exchange for a payment of five dollars per completed repair. Accordingly, Adroit and Diamond entered into a three-year contract allowing Adroit to operate in all of Diamond's facilities without competition, subject to the right of termination by either party upon 30 days notice. Adroit once again relocated its operations, this time to Salt Lake City, Utah, where it commenced operating in a large airport parking lot owned by Diamond.
Yagi and Cunningham hoped to have Adroit expand its operations to a large number of Diamond parking lots. However, the company required additional financing in order to be able to achieve this goal. Yagi contacted Miller. Miller reviewed some of Adroit's financial documentation provided by Yagi and agreed to make an initial loan of $2,500, while he considered future investment.
After Miller had more fully studied the financial documents provided by Yagi, Cunningham, Miller, and another man, Lawrence Nelson, approached Yagi with an ultimatum. They proposed that Miller and Nelson would invest in Adroit on the condition that Yagi's interest in Adroit be reduced to ten percent and that Yagi receive no other compensation for his role in developing the company. Cunningham, Miller, and Nelson also proposed that Yagi's managerial control over Adroit be eliminated. Yagi declined. Soon thereafter, Cunningham removed nearly all of Adroit's records that had been present in the company's Bellevue office. He then ceased all contact with Yagi.
Yagi soon began receiving correspondence at Adroit's Bellevue office directed to "Valet Auto Services, LLC" relating to what had been, up until that point, Adroit's business in the Diamond parking lot. Yagi discovered that immediately after he refused to have his ownership interest in Adroit reduced from 50 percent to 10 percent and his managerial authority eliminated, Cunningham, Nelson, and Miller had formed Valet as a limited liability company in order to take over Adroit's business. Deliveries to Adroit of Adroit's more than $100,000 in insurance receivables were redirected to Valet, while the employees that Adroit had trained continued to work under the direction of Cunningham in the Diamond parking lot, using the rock-chip repair equipment that Adroit had purchased. David Watson, a senior vice president with Diamond, was informed that Adroit had changed its name to Valet. Soon thereafter, Miller approached Watson, informed him that he and another individual were now in charge of Adoit's business operations, and sought to have Diamond enter into a new contract with Valet granting Valet the contractual rights held by Adroit.
Yagi brought suit against Cunningham, Miller, and Nelson, asserting Yagi's right to an accounting, seeking dissolution and custodianship of Adroit's assets, alleging tortious interference with a contract or business expectancy, violation of the Uniform Trade Secrets Act, fraud, conversion, breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. Cunningham failed to appear or answer and the trial court entered a default judgment against him. Yagi settled with Nelson.
Yagi's claims against Miller for conversion, tortious interference, and violation of the Uniform Trade Secrets Act proceeded to trial. The jury heard testimony from Yagi, Miller, Diamond's Watson, and Daniel Head, an employee at both Adroit and Valet. The jury returned a verdict finding Miller liable both for conversion and for tortious interference but not liable for violation of the Uniform Trade Secrets Act. The jury awarded Yagi damages in the amount of $310,340 on his conversion claim and $62,500 on his tortious interference claim.
Miller does not challenge the jury's determination of liability, but appeals the jury's damage awards.
Discussion Standard of Review
"An appellate court will not disturb an award of damages made by the fact finder unless it is outside the range of substantial evidence in the record, or shocks the conscience, or appears to have been arrived at as the result of passion or prejudice." Mason v. Mortgage Am., Inc., 114 Wn.2d 842, 850, 792 P.2d 142 (1990). The amount of damages for tortious interference with a contract is for the trier of fact to determine. Island Air, Inc. v. LaBar, 18 Wn. App. 129, 145, 566 P.2d 972 (1977). In examining whether substantial evidence supports a jury's determination of damages, an appellate court views the evidence in the light most favorable to the party for whom the verdict was entered. Herriman v. May, No. 25176-4-III, 2007 Wash. App. LEXIS 3281, at *7 (Dec. 20, 2007) (citing Bunch v. King County Dep't of Youth Servs., 155 Wn.2d 165, 178, 116 P.3d 381 (2005); Gestson v. Scott, 116 Wn. App. 616, 622, 67.
Conversion Damages
Miller contends that the jury could not properly have arrived at the amount of $310,340 as the damages caused by Miller's conversion of Adroit's assets because Yagi adduced insufficient evidence at trial to support that amount. According to Miller, there are several reasons why this is so. First, Miller contends that if the jury based its award on Adroit's lost future profits, then there was insufficient evidence in the record to support the award because testimony with respect to those profits was impermissibly speculative and conjectural. Next, Miller contends that the jury could not have properly considered testimony related to the investments that Yagi made in Adroit because most of those investment funds were "spent on consumables that do not constitute a chattel (thing) with any fair market value that could be converted." Finally, Miller contends that if the jury's award was based on accounts receivable, the award was unsupported because Yagi could produce no documents proving the existence of any such accounts or that Miller or Valet converted any of them. Accordingly, Miller does not request remand for recalculation of damages but, rather, asks that we vacate the judgment entered on the verdict in its entirety.
Miller's contentions are based on the fundamental misconception that the jury could not have awarded damages for conversion based purely on Adroit's value as a company. Further, Miller mischaracterizes the quantity and quality of evidence that Yagi was required to adduce in order for Yagi to recover Adroit's lost future profits. Yagi is correct when he observes that the single major shortcoming in Miller's analysis is his failure to acknowledge that the jury had a right to believe the testimony of and documentary evidence produced by Yagi.
"Juries have considerable latitude in assessing damages, and a jury verdict will not be lightly overturned." Herriman, 2007 Wash. App. LEXIS 3281, at *7 (citing Palmer v. Jensen, 132 Wn.2d 193, 197, 937 P.2d 597 (1997); Cox v. Charles Wright Academy, Inc., 70 Wn.2d 173, 176, 422 P.2d 515 (1967)). "`If there is any justifiable evidence upon which reasonable minds might reach conclusions that sustain the verdict, the question is for the jury.'" Lockwood v. ACS, Inc., 109 Wn.2d 235, 243, 744 P.2d 605 (1987) (quoting Levy v. N. Am. Co. for Life Health Ins., 90 Wn.2d 846, 851, 586 P.2d 845 (1978)). Mere inconsistencies in evidence are matters that affect the weight and credibility of that evidence, are the exclusive province of the jury, and do not justify overturning a jury's determination of damages. Herriman, 2007 Wash. App. LEXIS 3281, at *7 (citing Dupea v. City of Seattle, 20 Wn.2d 285, 290, 147 P.2d 272 (1944); McUne v. Fuqua, 45 Wn.2d 650, 653, 277 P.2d 324 (1954)).
At the outset, we note that Miller's contention that the jury could not consider Yagi's investments in Adroit as an element of Adroit's value — an assertion for which Miller provides no citation to authority — is simply incorrect. For purposes of conversion claims, "`[c]hattel' includes both tangible and intangible goods, such as corporate property." Lang v. Hougan, 136 Wn. App. 708, 718, 150 P.3d 622 (2007) (citing In re Marriage of Langham, 153 Wn.2d 553, 565, 106 P.3d 212 (2005)). Intangible property subject to conversion specifically includes the goodwill value of a company. See Lang, 136 Wn. App. at 719. It also includes the present value of a right pursuant to a contract. See Langham, 153 Wn.2d at 567. The measure of damages in conversion for intangible property "`is the value of the article converted at the time of the taking.'" Langham, 153 Wn.2d at 567 (quoting Junkin v. Anderson, 12 Wn.2d 58, 63, 120 P.2d 548 (1941)).
Miller would have us believe that Yagi was simply throwing good money after bad in his continued financing of Adroit. However, the jury was certainly not required to believe this when it assessed Adroit's value and, thus, neither are we.
In addition, it is important to clarify that Miller's attempt to segregate the jury's verdict into isolated components and then separately invalidate each of those components does not reflect the actual verdict form. The jury awarded damages to Yagi by general verdict for both of the claims on which it found Miller liable. No factual finding was made with respect to separate components of the award amounts. CP at 593-94.
Moreover, contrary to what Miller implies, the jury was allowed to consider Adroit's loss of future profits in determining the damages that Yagi suffered as a result of Miller's conversion of Adroit's assets. A contract's value in an action for conversion is necessarily the same as that which is available upon an action for breach of the contract, i.e., the amount sufficient to put the wronged party in the position they would have been in had the contract been performed. Langham, 153 Wn.2d at 567; see also TMT Bear Creek Shopping Ctr., Inc. v. PETCO Animal Supplies, Inc., 140 Wn. App. 191, 211, 165 P.3d 1271 (2007) (stating standard measure of damages in contract action).
In Washington, damages resulting from lost future profits are properly recoverable pursuant to a contract right "when (1) they are within the contemplation of the parties at the time the contract was entered, (2) they are the proximate result of defendant's breach, and (3) they are proven with reasonable certainty." Tiegs v. Watts, 135 Wn.2d 1, 17, 954 P.2d 877 (1998) (citing Larsen v. Walton Plywood Co., 65 Wn.2d 1, 390 P.2d 677, 396 P.2d 879 (1964)). The dispute in this case focuses on the third prong, or whether Yagi proved Adroit's lost profits with sufficient certainty that the jury could legitimately have arrived at its damage award. We conclude that he did.
Miller contends that Adroit's lost future profits under its contract with Diamond, as demonstrated by the evidence adduced by Yagi at trial, are insufficiently certain to provide a basis of recovery. Pointing to Farm Crop Energy, Inc. v. Old National Bank, 109 Wn.2d 923, 750 P.2d 231 (1988), Miller contends that this is so because, while the usual method of proving lost profits is to establish profit history through the presentation of factual data in the form of testimony and records of the business, a plaintiff attempting to prove lost profits for a new business must provide expert testimony of market conditions and a profit showing of identical or similar businesses in the vicinity. According to Miller, Yagi's evidence of lost profits is remote, speculative, and conjectural because it was not based on such expert testimony and, thus, the jury's factual finding as to damages must be reversed in its entirety.
We are not persuaded by this argument for two reasons. First, Adroit was not a "new company" whose profits had to be estimated by complex market analysis. It had been operating continuously for months and had in its records a nearly constant stream of receivables. Second, the vast majority of the evidence provided by Yagi was, in fact, the presentation of factual data in the form of testimony and records of the business regarding Adroit's actual past profits, including those from Diamond's Salt Lake City parking lot. Yagi spent an entire morning testifying about various business records, including contracts, work orders, receipts, and accounts receivable, which were entered into evidence.
Miller's contention that Yagi should have produced better records from which to testify does not warrant serious consideration. As Yagi correctly points out, "[o]nce the fact of damage has been established by a preponderance, the plaintiff is obligated to produce only the best evidence available which will afford the jury a reasonable basis for estimating the dollar amount of his loss." Seattle W. Indus., Inc. v. David A. Mowat Co., 110 Wn.2d 1, 6, 750 P.2d 245 (1988). Moreover, the inability of Yagi to more fully assemble financial records is solely attributable to the fact that Cunningham, joint tortfeasor with Miller, absconded with Adroit's records and, after receiving notice of Yagi's suit, disappeared entirely. Notwithstanding this impediment to proper discovery, Yagi was able to find enough work reports from Adroit's Milwaukee, Denver, and Salt Lake City operations to reconstruct a substantial record of Adroit's investment history, revenues, and expenses. This information was presented to the jury.
Yagi provides us with legal authority much more applicable to this case than does Miller. Miller relies upon Farm Crop, in which the court found the testimony as to damages insufficient. The testimony in Farm Crop, however, consisted of highly technical alcohol production estimates for a facility that had never been constructed, the design of which could be compared with no existing facility in the Northwest, and for which the availability of the raw materials necessary for production was doubtful. Farm Crop, 109 Wn.2d at 928-29. In comparison, Yagi points to Tiegs, where a verdict incorporating future profits was found to be supported by substantial evidence. In that case, as in this one, the evidence providing the basis for the jury's award of lost future profits was the testimony of the plaintiff business owners themselves, based on the records of the business seeking to recover lost profits. Tiegs, 135 Wn.2d at 18. Yagi testified from personal knowledge of Adroit's financial history. Moreover, records of that history were entered into evidence and were present with Yagi on the witness stand.
The award reached by the jury on Yagi's conversion claim was within the range of evidence adduced by Yagi. Yagi testified that his total investments and deferred compensation in Adroit equaled over $170,000. Yagi testified that Adroit had receivables worth more than $100,000. Based on a figure less than Adroit's actual average charge per customer and less than Adroit's actual average of 20 jobs per day in Denver and Salt Lake City, Yagi testified that Adroit could have expected annual gross revenues of $240,000 and annual gross profits of $180,000. Based on a projected expansion of Adroit's operations into ten of Diamond's parking lots, Yagi testified that Adroit could expect an annual gross profit of $1,800,000.
Yagi adduced evidence at trial sufficient to estimate the value of Adroit as a company based on the company's uncollected receivables, as well as Yagi's personal investment into its employees, equipment, and business methods. Yagi's testimony also provided reasonably certain evidence of the lost future profits resulting from Miller's conversion of Adroit's contractual rights pursuant to Adroit's contract with Diamond. There is no legal reason why the jury was not entitled to believe this evidence. Furthermore, the evidence was sufficient to the support the jury's verdict. We conclude that the jury's award of $310,340 in damages on Yagi's conversion claim against Miller is not outside the range of substantial evidence in the record. Consequently, we affirm the judgment entered on the jury's award.
Tortious Interference Damages
The analysis for Miller's assignment of error with respect to the damages awarded for Yagi's tortious interference claim is substantially identical to that required for the conversion claim. In particular, the jury could properly accept the evidence adduced by Yagi showing the profits that Adroit might have realized had Miller and Valet not wrongfully interfered with Adroit's contract with Diamond. The evidence was not qualitatively lacking, because "`[t]he usual method of proving lost profits is from profit history.'" Farm Crop, 109 Wn.2d at 928 (quoting Larsen, 65 Wn.2d at 16). Profit history was precisely the basis of Yagi's testimony regarding the future value of Adroit's contract with Diamond. The jury's award of $62,500 on Yagi's tortious interference claim fell well within the range of Yagi's testimony regarding Adroit's lost future profits.
Because, as with Yagi's conversion claim, there was substantial evidence in the record to support the jury's award of damages to Yagi on Yagi's tortious interference claim, we also affirm the judgment on the jury's award.
Affirmed.
We Concur: