NO. 94-163
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
BIING SONG LEE and MEI-HSUI LEE,
Plaintiffs, Respondents,
and Cross-Appellants,
v.
JAMES T. KANE and DEIRDRE KANE
a/k/a D. KANE,
Defendants, Counterclaimants, sr,*Tc (-p ~mt4AN~
Third-Party Plaintiffs and Appellants,
v.
BIING SONG LEE and MEI-HSUI LEE,
Counterclaim Defendants,
v.
YU-CHI LAI,
Third-Party Defendant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael H. Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
John A. Lence, Attorney at Law,
Kalispell, Montana
For Respondents:
James D. Moore, Morrisons, McCarthy and
Moore, Kalispell, Montana
Submitted on Briefs: January 19, 1995
Decided: April 11, 1995
Filed:
Justice William E. Hunt, Sr., delivered the opinion of the Court.
James T. Kane appeals from the jury verdict and denial of his
post-trial motions in the Eleventh Judicial District court,
Flathead County. Biing Song Lee cross-appeals. We affirm in part
and remand for determination of damages for Lee's future economic
loss, hearing loss, and pain and suffering.
We frame the issues on appeal as follows:
1. Did the District Court err in denying Kane's motion for
judgment as a matter of law on the issue of contract damages and
lost profits?
2. Was there sufficient evidence to support the jury's award
of contract damages?
3. Did the District Court err by limiting damages for lost
profits to the time period prior to the restaurant's closing?
4. Does substantial evidence support an award of no damages
for Lee's pain and suffering and for his hearing loss?
In 1990, Biing-Song Lee and his family decided to move from
Vermont to Montana. Before moving, Lee traveled to Whitefish,
Montana, to find facilities in which to open a Chinese restaurant.
He found a vacant facility previously used as a Chinese restaurant
in a building owned by James Kane. Kane owned and operated a bar
which was located in the same building as the restaurant facility.
Kane and Lee entered into a lease agreement for the restaurant
facility. They initially agreed on an annual rent of $18,000.
Later Lee agreed to pay an additional $4000 in rent and Kane agreed
2
to pay Lee 15 percent of the total drink sales that Lee made from
Kane's bar. Lee paid Kane $5000 of the rent in advance.
According to Lee, Kane agreed to make a variety of repairs
before Lee opened the restaurant. These repairs included, but were
not limited to, fixing holes in the walls, replacing broken
windows, replacing the pilot light in the oven, installing a door,
repainting the kitchen, and general cleaning. Lee hoped to open
the restaurant by July 1, 1991. In anticipation of this opening
date, Lee hired three people from San Francisco as staff and made
arrangements for them to be in Whitefish on July 1.
Lee and his family moved to Montana in late June 1991. When
they arrived, they discovered that virtually none of the repairs
had been made. The facility lacked hot water, and at times lacked
any water; the walls and carpet contained holes; and much of the
equipment was either missing, broken, or unclean.
Despite the conditions, Lee paid Kane the remaining $17,000 in
rent. Lee paid to have some equipment installed or repaired prior
to opening the restaurant. Lee testified that he and his family
and staff cleaned the facility and opened it for business on
July 6, 1991.
Lee testified that throughout the time he operated the
restaurant, he had problems with the equipment and the facilities.
He also testified that, on numerous occasions, Kane entered the
restaurant, including the kitchen area, without notice. According
to Kane, he needed to enter the kitchen on various occasions to
3
check the water gauges, as the water supply for his bar came
through the kitchen.
Lee testified that after a few months he discovered that the
15 percent drink sales arrangement was illegal. He discontinued
the practice, refunded to Kane the money he had received from the
arrangement, and placed a sign in the restaurant stating that
restaurant patrons would have to get their drinks directly from the
bar. On October 8, 1991, Kane entered the restaurant during
business hours and began taking pictures of the sign. Lee's wife,
Mei-Hsui Lee, asked Kane not to take photos in front of the
customers, and told Kane to leave.
Kane left, but returned to the restaurant with his daughter,
Deirdre Kane. Kane and Deirdre entered the kitchen, and an
altercation ensued between Kane and Lee. Lee claimed that Kane
assaulted and battered him and that Kane also pushed his sister
Yu-Chi Lai. Kane claimed that Lee struck him first and that he
only struck Lee to protect his daughter. The parties moved from
the kitchen into the dining room area of the restaurant. There,
Kane struck Lee on the face and/or head at least two times.
According to Kane, he struck Lee to protect Deirdre. Kane claimed
that Lee also struck him, but this claim was disputed by the
testimony of patrons who witnessed the event. Deirdre and Mrs. Lee
also struggled and physically interacted while in the dining room.
Lee claimed that as a result of the fight, his hearing is now
impaired. The Lees closed their restaurant on May 14, 1992.
4
The Lees filed a complaint against Kane on December 31, 1991.
They filed an amended complaint on January 7, 1992, adding Kane's
daughter as a defendant. On February 25, the Lees filed a second
amended complaint that listed 15 causes of action arising from
contractual problems and from the altercation on October 8, 1991.
On April 13, 1992, Kane and his daughter filed an answer and
counterclaim against the Lees, listing eight causes of action,
including assault and battery. On the same date, the Kanes also
filed a third-party complaint against Lee's sister Yu-Chi Lai for
assault and battery.
On July 7, 1992, the Lees filed their answer to Kane's
counterclaim and Yu-Chi Lai filed her answer to Kane's third-party
complaint. On the same date, Lai filed a counterclaim against
Deirdre Kane for assault and battery. Deirdre filed her answer to
Lai's counterclaim on July 27, 1992.
The case went to trial before a jury, which rendered its
verdict in favor of the Lees on September 25, 1993. The special
verdict form that the jury completed found Kane liable for the
following acts and awarded the following corresponding amounts:
Breach of contract $ 32,823.OO
Breach of the covenant of quiet enjoyment 1.00
Trespass 10.00
Assault and/or battery 604.10
Intentional interference with
Lee's business 1,500.00
Intentional infliction of
emotional distress 370.00
Total $ 35,308.10
5
The jury additionally found that Lee was entitled to punitive
damages from Kane. In a separate hearing on October 4, 1993, the
jury returned a verdict awarding Lee $19,500 in punitive damages.
On October 13, 1993, the District Court entered judgment and
awarded Lee the damages set forth in the jury's verdicts. Kane
filed several post-trial motions, including motions for judgment as
a matter of law and new trial, which the District Court denied.
James Kane appeals and Lee cross-appeals.
ISSUE 1
Did the District Court err by denying Kane's motion for
judgment as a matter of law on the issues of contract damages and
lost profits?
At the close of the Lees' case, Kane moved for judgment as a
matter of law on the issues of contract damages and lost income.
Kane argued that Lee failed to produce sufficient evidence to allow
those issues to go to the jury. Kane argues on appeal that the
District Court erred by denying the motion.
"[A] directed verdict may be granted only where it appears as
a matter of law that . . [the nonmoving party] could not recover
upon any view of the evidence, including the legitimate inferences
to be drawn from it." Fox Grain and Cattle Co. v. Maxwell (Mont.
1994), 885 P.2d 432, 436, 51 St. Rep. 1136, 1138 (quoting Simchuk
v. Angel Island Community Ass'n (1992), 253 Mont. 221, 225, 833
P.2d 158, 160).
6
Kane bases his argument on the statement made by the District
Court Judge in chambers that "there is no rational basis upon which
the jury can make a determination of future economic loss because
of the failure of any expert testimony along those lines . . . .'I
Kane argues that if Lee failed to introduce sufficient evidence to
support future damages, then he also failed to introduce sufficient
evidence to support past and present contract damages, including
lost profits.
Kane further contends that because there was no expert
testimony to establish the amount of lost profits prior to the
restaurant closing, that issue should not have gone to the jury.
However, Kane correctly concedes in his reply brief "that the use
of expert testimony is not essential in proving economic
loss . . .)I As this Court stated in Fox Grain, 885 P.Zd at 436:
While damages for lost profits may not be speculative, it
is only required that they be proven with "the best
evidence under the circumstances [which] will support a
reasonably close estimate of the loss."
(Quoting Stensvad v. Miners and Merchants Bank (1982), 196 Mont.
193, 206, 640 P.2d 1303, 1310, cert. denied (1982), 459 U.S. 831,
103 s. Ct. 69.) While in some cases expert testimony may
constitute "the best evidence under the circumstances," we cannot
say that expert testimony is required to prove lost profits in all
cases.
The record in this case reveals that Lee introduced sufficient
evidence, that when viewed in the light most favorable to Lee,
warranted the submission of the issues of contract damages and lost
7
profits to the jury. We hold that the District Court properly
denied Kane's motion for judgment as a matter of law.
ISSUE 2
Was there sufficient evidence to support the jury's award of
contract damages?
Kane contends that the jury's verdict awarding contract
damages and lost profits is improper for two reasons. First, Kane
contends that Lee failed to provide sufficient evidence, and
therefore, the jury engaged in speculation. Secondly, Kane
contends that the award for breach of contract was excessive
because Lee failed to mitigate his losses.
In Hansen v. Hansen (1992), 254 Mont. 152, 157, 835 P.2d 748,
750-51, we held:
Our scope of review of jury verdicts is necessarily
very limited. This Court will not reverse a jury verdict
which is supported by substantial credible evidence.
This Court has defined substantial credible evidence as
evidence which a reasonable mind might accept as adequate
to support a conclusion. The evidence may be inherently
weak and conflicting, yet it may still be considered
substantial. It is well established that if the evidence
is conflicting, it is within the province of the jury to
determine the weight and credibility to be afforded the
evidence. Finally, upon reviewing a jury verdict to
determine if substantial credible evidence exists to
support the verdict, this Court must view the evidence in
the light most favorable to the prevailing party.
(Citations omitted.)
In instructing the jury on the issue of contract damages, the
District Court used the exact language of § 27-l-311, MCA, which
provides:
8
For the breach of an obligation arising from contract,
the measure of damages, except when otherwise expressly
provided by this code, is the amount which will
compensate the party aggrieved for all the detriment
which was proximately caused thereby or in the ordinary
course of things would be likely to result therefrom.
Damages which are not clearly ascertainable in both their
nature and origin cannot be recovered for a breach of
contract.
The primary problem with Kane's first argument is that it
hinges almost exclusively on the contention that Lee failed to
establish lost profits. However, because the jury's lump sum award
of $32,823 for breach of contract was not broken into separate
components, we are provided with nothing to indicate which, if any,
portion of the~award constituted lost profits.
Moreover, if the jury did include lost profits in its award,
we are convinced that substantial credible evidence exists to
support the jury's award. In Stensvad, this Court held:
Damages for loss of profits may be awarded if not
speculative. The rule that prohibits speculative profits
does not apply to uncertainty as to the amount of such
profits but to uncertainty or speculation as to whether
the loss of profits is the result, of the wrong and
whether such profit would have been derived at all. Once
liability is shown, that is the certainty that the
damages are caused by the breach, then loss of profits on
a reasonable basis for computation and the best evidence
available under the circumstances will support a
reasonably close estimate of the loss by a District
Court. But no damages are recoverable which are not
clearly ascertainable both in nature and origin, and only
profits which are reasonably certain may be awarded.
Stensvad, 640 P.2d at 1310 (citations omitted).
The District Court in this case instructed the jury:
You may not award speculative damages. The term
"speculative damages" refers to mere guesswork as to
whether or not the claimed damage is a result of the
9
Defendants' action, rather than to an uncertainty as to
the amount of the damages.
The court further instructed:
Damages are recoverable in this action for loss
caused or for profit and other gain prevented by
defendant's breach only to the extent that the evidence
affords a reasonable basis for estimating their amount in
money. Damages which are a matter of mere speculation
cannot be the basis of recovery. Recovery cannot be
denied for damages simply because they are difficult to
determine.
The jury found that Kane breached his contract with Lee.
Having determined liability, it was the jury's duty to calculate an
award of damages, including lost profits, based on the evidence
presented. Lee testified that after Kane failed to clean and make
repairs, Lee delayed the opening of the restaurant by five days
while he, his wife, and his employees cleaned and made repairs.
Lee testified that he and his wife spent very long hours making the
restaurant fit for use. Lee testified and produced receipts for
over $15,000 of his own expenses, including over $2200 for a new
ice machine to replace the one that Kane removed, over $3700 for a
stainless steel kitchen hood and exhaust fan, and nearly $2400 for
plumbing and heating parts and labor. Lee also testified that, in
exchange for 15 percent of the restaurant drink sales from Kane's
bar, he agreed to pay an additional $4000 in rent per year. Lee
testified that after three months he repaid Kane the amount he had
received for drink sales because he believed the arrangement to be
illegal.
10
Lee also provided specific information to support an award of
lost profits. He introduced all of his actual income receipt
records, rent and utility records, costs of goods and variable
expense figures, complete tax returns for the three years prior to
moving to Montana as well as the two years in Whitefish, and
several summaries of the foregoing information. Kane, however,
focuses on the Lees' tax returns and argues that they "establish
and prove nothing" because "the Lees did not deduct any wages for
their own work." Kane asserts that the "true net income" of the
restaurant for 1991 actually would have been a net loss if an
amount for wages had been subtracted from the $8296.88 of net
profit that the Lees reported to the Internal Revenue Service.
According to Kane's attorney, the Lees' wages should have been
calculated using the following formula:
$4.25 (federal minimum wage)
x 40 hours per week
x the number of weeks the restaurant was open in 1991
Besides simply asserting this argument, Kane's attorney did not
introduce any testimony, evidence, or authority to support the
theory. Moreover, Kane's attorney failed to introduce any
testimony or evidence to contradict the documents introduc'ed by the
Lees. It, therefore, was within the province of the jury to
determine the weight and credibility to be afforded the evidence
that the parties introduced concerning lost profits. Hansen
, 835
P.2d at 751.
11
We further reject Kane's assertion that the jury awarded
excessive damages because it failed to consider Lee's efforts to
mitigate his damages. According to Kane, the Lees failed to take
reasonable steps to mitigate their economic losses.
The District Court instructed the jury:
The Plaintiffs have a duty to minimize their
damages. However, that duty does not require them to do
what is unreasonable or impracticable.
The record shows that defense counsel fully cross-examined Lee
regarding his efforts to mitigate his losses. It was, therefore,
within the jury's province to weigh Lee's testimony and determine
whether he reasonably mitigated his damages. Hansen, 835 P.2d at
751
We hold that substantial credible evidence supports the jury's
award of contract damages.
ISSUE 3
Did the District Court err by limiting damages for lost
profits to the time period prior to the restaurant's closing?
On cross-appeal, Lee contends that the District Court erred by
giving Jury Instruction No. 29 which provides:
If you find that Defendant breached his contract
with Plaintiff, committed fraud or deceit against
Plaintiff, or committed an intentional interference with
business, your award of damages should include lost
profit up to May 14, 1992 or other prospective gain from
the operation of Plaintiff's business. Damages for lost
profits or other gains are recoverable only to the extent
that the evidence affords a reasonable basis for their
determination. However, recovery cannot be denied simply
because the damages are difficult to determine.
With regard to jury instructions, this Court has held:
12
It is within the discretion of the District Court to
decide how to instruct the jury, taking into account
theories of the parties, and we will not overturn the
court's decision unless the District Court abused its
d i s c r e t i o n . If jury instructions when taken as a
whole properly state the applicable law, there is no
abuse of discretion on the part of the District Court.
Chambers v. Pierson (Mont. 19941, 880 P.2d 1350, 1354-55, 51
St. Rep. 921, 924 (citations omitted). We determine that the
District Court in this case abused its discretion by instructing
the jury that lost profits could be awarded only up to May 14,
1992.
The record shows that after the close of the Lees' case,
counsel met with the Judge in chambers. Defense counsel moved for
judgment as a matter of law on the issue of contract damages on the
grounds that the Lees failed to meet their burden of proof. The
District Court denied the motion as to past and present contract
damages, but ruled that it would foreclose future damages by
providing a limiting instruction. The District Court Judge stated:
I guess I agree with the defense here that there is no
rational basis upon which the jury can make a
determination of future economic loss because of the
failure of any expert testimony along those lines . . .
As we stated under Issue 1, this Court does not require expert
testimony to prove lost profits; we only require that lost profits
be proven with "the best evidence under the circumstances [which]
will support a reasonably close estimate of the loss." Fox Grain,
885 P.2d at 436; Stensvad, 640 P.2d at 1310. We, therefore, hold
that the District Court abused its discretion by limiting lost
profits to the period prior to the restaurant's closing.
13
ISSUE 4
Does substantial evidence support an award of no damages for
Lee's pain and suffering and for his hearing loss?
Lee contends that the jury's award of damages resulting from
Kane's assault is insufficient because it awarded the amount of his
medical costs but did not award for his pain and suffering or for
his hearing loss. Kane, on the other hand, argues that the jury
simply chose to believe his expert witness who testified that he
had never seen hearing loss following a boxing match.
Lee cites Gehnert v. Cullinan (19841, 211 Mont. 435, 685 P.2d
352, in support of his position. In Gehnert, the plaintiff was
assaulted by the defendants. The jury awarded the plaintiff his
medical expenses only. This Court reversed and remanded for a new
trial on damages, stating that " [Iliability having been
established, it was the jury's duty to award damages for pain and
suffering for the serious injuries suffered." Gehnert, 685 P.2d at
354 (citing Allers v. Willis (19821, 197 Mont. 499, 643 P.2d 592;
Ankeny v. Grunstead (19761, 170 Mont. 128, 551 P.2d 1027;
Holenstein v. Andrews (1975), 166 Mont. 60, 530 P.2d 476; Walker v.
Alaska Road Commission (Alaska 1964), 388 P.2d 406).
As we stated above, this court will not disturb a jury verdict
if there is substantial credible evidence in the record to support
the verdict. Hansen, 835 P.2d at 751. In this situation, where
Lee appeals from what he considers an insufficient award, our
14
inquiry is whether there is substantial evidence to justify the
award of no damages for pain and suffering and hearing loss.
The parties introduced conflicting evidence as to whether the
assault caused Lee's hearing loss. Lee testified at trial that he
had no problem with his hearing before Kane assaulted him. Lee's
treating physician, a doctor with 20 years experience as an ear,
nose and throat specialist, testified that Lee was administered an
audiometric test. The test revealed that Lee suffered a conductive
deafness in his left ear. The doctor stated that the deafness was
most likely caused by an ossicular discontinuity or fracture--a
separation of the tiny bones in the inner ear--and that such a
discontinuity or fracture could very well have been caused by a
blow to the head. Although some of the symptoms that Lee reported,
such as the ringing in his ears, could not be objectively verified,
the doctor stated that the symptoms that Lee reported were
consistent with a conductive hearing loss caused by a blow to the
head.
Kane's expert, who treated boxers following boxing matches,
testified that he had never observed hearing loss as a result of a
blow to the head. However, he stated that he would assume that if
the problem did not exist prior to the blow, and did exist after
the blow, the blow probably caused the hearing loss. Kane offered
only minimal testimony that indicated Lee suffered hearing problems
prior to the assault, and that testimony consisted of one of Kane's
15
employees stating that on the few occasions that he had talked to
Lee, Lee would cock his head to one side.
Kane admitted that he struck Lee on the head. The jury found
Kane liable for the assault against Lee. The jury awarded Lee
damages of $604.10, an amount equal to Lee's medical expenses.
Pursuant to Gehnert, it was the jury's duty to award Lee damages
for pain and suffering for his serious injuries. Viewing the
evidence in a light most favorable to Kane, we hold that there is
not substantial evidence to support the jury's failure to award
damages for pain and suffering or for the hearing loss. On
retrial, the jury should determine an appropriate amount of damages
for Lee's pain and suffering and hearing loss attendant to the
assault.
We affirm in part, reverse in part, and remand for proceedings
consistent with this opinion.
We concur:
16
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
John A. Lence
Attorney at Law
69 North Main Street
Kalisnell. MT 59901
---..-r ~~,
James D. Moore, Esq.
Moore & Doran
pn au 11w
L . .. -“‘.__<”
Kalispell, MT 59901
Richard P. DeJana
Attorney at Law
P.O. Box 1757
Kalispell, MT 59903-1757
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA
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Deputy d