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Ben Lomond Inc., v. Railwater Terminal Co. (5/10/96), 915 P 2d 632
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Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street,
Anchorage, Alaska, 99501, telephone (907) 264-0607, fax (907) 276-
5808.
THE SUPREME COURT OF THE STATE OF ALASKA
BEN LOMOND, INC., )
) Supreme Court No. S-6303
Appellant, )
) Superior Court No.
v. ) 3AN-89-8413 CI
)
LOUIS SCHWARTZ, Individually, ) O P I N I O N
and RAILWATER TERMINAL CO., )
) [No. 4349 - May 10, 1996]
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Mark C. Rowland, Judge.
Appearances: Brent M. Wadsworth, Wadsworth &
Associates, Anchorage, for Appellant. Ted
Stepovich, Stepovich, Kennelly & Stepovich,
P.C., Anchorage, for Appellees.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, Justices, and Carpeneti,
Justice, pro tem.
EASTAUGH, Justice.
I. INTRODUCTION
Ben Lomond, Inc. (Lomond) appeals the superior court's
denials of Lomond's motions for directed verdict, judgment
notwithstanding the verdict (JNOV), and new trial. We reverse the
superior court's decision with regard to the amount of damages, and
affirm in all other respects.
II. FACTS AND PROCEEDINGS
In May 1987 Railwater Terminal Company (Railwater) and
Ben Lomond, Inc. entered into a joint venture agreement to salvage
materials from oil fields on Alaska's North Slope. In 1989 Lomond
filed suit against Railwater alleging that Louis Schwartz,
Railwater's president, had converted joint venture funds to his own
use, thereby harming the joint venture, and that Schwartz should be
required to contribute to the losses of the joint venture.
Railwater filed a separate suit against Lomond, claiming
that Lomond had breached a fiduciary duty of full disclosure and
fair dealing owed to Railwater. Railwater further alleged that
Lomond enticed Railwater to provide labor, expertise, and
equipment, at no cost to the joint venture with the intent of
defrauding Railwater. Railwater claimed that Lomond's actions
resulted in a monetary loss to Railwater and requested damages.
Lomond filed a counterclaim and third-party complaint in
Railwater's suit. The two cases were consolidated for trial.
At the close of evidence at trial, Lomond moved for a
directed verdict on the issue of fraud. The court denied the
motion and submitted the case to the jury. By special verdict, the
jury found that the joint venture had neither made a profit nor
suffered a loss. The jury also found that Schwartz had taken
$292,673 from the joint venture for his own use. Finally, the jury
found that Lomond was guilty of breaching its fiduciary duty to
Railwater by withholding material information from Railwater during
the course of the joint venture, and that this breach had damaged
Railwater in the amount of $348,000. The court polled and excused
the jury.
Lomond moved for JNOV or a new trial under Civil Rules 50
and 59. The court denied both motions and entered final judgment,
ordering that the amount taken by Schwartz should be returned to
the joint venture and split between the parties. The result was a
net judgment against Lomond of $201,663.50, plus prejudgment
interest. Lomond appeals the denials of its motions for directed
verdict, JNOV, and new trial, arguing that the jury's verdict that
Lomond had breached a duty to Railwater was inadequately supported
by the evidence. (EN1)
III. DISCUSSION
A. Motions for Directed Verdict and JNOV
1. Reviewability
Railwater argues that the superior court's denial of
Lomond's JNOV is not reviewable because Lomond failed to move for
a directed verdict on the issue of breach of fiduciary duty.
Railwater contends that Lomond moved for directed verdict only on
the issue of fraud. Railwater points out that Lomond neither
specifically objected to the jury being instructed regarding breach
of fiduciary duty, nor contended at trial that the evidence was not
sufficient to permit a finding of breach of fiduciary duty. It was
not until after the jury returned its verdict and had been
discharged that Lomond addressed the issue of breach of fiduciary
duty. Consequently, Railwater argues, this court cannot review the
superior court's refusal to grant a JNOV or a new trial on the
issue of breach of fiduciary duty.
A court's refusal to grant JNOV cannot be considered on
appeal if the party failed to move for a directed verdict on that
issue at the close of the evidence. Richey v. Oen, 824 P.2d 1371,
1374 (Alaska 1992); Alaska R. Civ. P. 50(b). However, in Richey
the two issues, negligence and causation, were clearly distinct.
Richey moved for a directed verdict only on the issue of
negligence. Consequently, she could not argue that it was error
not to grant a JNOV on the issue of causation. Richey, 824 P.2d at
1374. In contrast, the parties in this case effectively merged the
claims of breach of fiduciary duty and fraud during the course of
litigation.
The concepts of fraud and breach of fiduciary duty are
closely related. This court has held that "[f]raud can be
established by silence or non-disclosure when a fiduciary
relationship exists between parties. . . . The fiduciary has a duty
to fully disclose information which might affect the other person's
rights and influence his action." Carter v. Hoblit, 755 P.2d 1084,
1086 (Alaska 1988) (citing W. Page Keeton et al., Prosser and
Keeton on the Law of Torts  106, at 738-39 (5th ed. 1984);
Wilkinson v. Smith, 639 P.2d 768, 771-72 (Wash. App. 1982)). The
existence of a fiduciary duty allows a finding of fraud even where
the fraud is committed by silence or non-disclosure, while the
absence of a fiduciary duty precludes a finding of fraud unless the
offender makes remarks which are either half true or which omit
material information. Carter, 755 P.2d at 1086. Fraud can thus be
a type of breach of fiduciary duty.
The parties and court treated the fraud and breach of
fiduciary duty claims as a single claim. The superior court denied
Lomond's motion for directed verdict on the issue of fraud; it
therefore must have intended to place the issue of fraud before the
jury. The only portion of the special verdict form which could
have presented the fraud question to the jury is the section which
addressed the issue of breach of fiduciary duty. Railwater did not
object to the jury instructions or special verdict form, and even
made affirmative statements indicating it believed that withholding
information regarding expenses was fraudulent.
In sum, it appears that all parties believed that the
special verdict form addressed the claims of fraud and breach of
fiduciary duty together, and that the claim of breach of fiduciary
duty was factually based on Lomond's allegedly fraudulent conduct.
Although the two claims were pled separately, they were effectively
merged through the trial. The same evidence was used to support
both claims, and both parties and the court treated the claims as
one. Accordingly, we hold that the court's denial of Lomond's JNOV
motion is reviewable.
2. Merits of denial of directed verdict and JNOV
motions
In reviewing the denial of motions for a directed verdict
or JNOV, we do not weigh conflicting evidence or judge the
credibility of witnesses. Mullen v. Christiansen, 642 P.2d 1345,
1348 (Alaska 1982); Richey, 824 P.2d at 1374. Instead, we
determine whether the evidence, when viewed in the light most
favorable to the non-moving party, is such that reasonable persons
could not differ in their judgment as to the facts. Mullen, 642
P.2d at 1348.
The evidence presented at trial is discussed in detail
below. We hold that the evidence was such that reasonable persons
could differ in their judgment; the superior court therefore
correctly denied Lomond's motions for a directed verdict and JNOV.
B. Motion for New Trial
Lomond contends that the superior court erred by failing
to grant Lomond a new trial. Lomond argues that (1) Railwater
failed to present evidence adequate to permit a finding of breach
of fiduciary duty; and (2) even if a breach was shown, the evidence
did not provide a reasonable basis for the jury's award against
Lomond.
Whether to grant or deny a new trial is within the trial
court's discretion. Kulawik v. ERA Jet Alaska, 820 P.2d 627, 639
(Alaska 1991). We review the trial court's decision under the
abuse of discretion standard and will overturn the trial court's
denial of a new trial only if the evidence supporting the verdict
is completely lacking or is so slight and unconvincing as to make
the verdict plainly unreasonable and unjust. Id.; see also Zerbetz
v. Municipality of Anchorage, 856 P.2d 777, 784 (Alaska 1993).
1. Breach of fiduciary duty
In order to prevail on its claim of breach of fiduciary
duty, Railwater had the burden of establishing by a preponderance
of the evidence that Lomond had knowledge of material facts which
it failed to disclose to Railwater, and that Railwater would have
acted differently had it known such facts, thereby avoiding
damages. Carter, 755 P.2d at 1086. Railwater also had the burden
of establishing the amount of such damages. The record at trial
established that numerous charges were made by Lomond against the
joint venture, including car payments, Lomond's bank fees, personal
mortgage fees, telephone bills, insurance, medical bills, tuition
fees, cable television bills, legal fees, prescriptions, and labor
costs. Railwater alleged that these charges were "unauthorized,
unrelated and unnecessary expenses." Schwartz testified that he
did not know what costs were charged by Lomond to the joint venture
and that he repeatedly asked for receipts regarding moneys spent,
but was not provided with such receipts. Schwartz testified that
he attempted to obtain information regarding expenses in order to
"close out"the joint venture in 1988, but that Norman Thompson,
Lomond's president, refused to give him this information. This
evidence amply supported the jury's finding of breach of fiduciary
duty.
Lomond nonetheless argues that the jury's finding of a
breach of fiduciary duty resulting in $348,000 in damages is
inconsistent with its finding that the joint venture neither made
a profit nor suffered a loss. However, Lomond failed to ask the
trial court to resubmit the issue to the jury before it was
discharged; Lomond is thereby precluded from arguing that the
verdict is inconsistent. Grow v. Ruggles, 860 P.2d 1225, 1226
(Alaska 1993) ("[W]e have long held that challenges to the
consistency of a verdict are deemed waived unless made prior to the
discharge of the jury."). Moreover, the jury's verdict is not
necessarily inconsistent. The jury may have believed that but for
both parties' misappropriation of funds, the joint venture would
have made a profit. Thus, a finding of no profit is consistent
with the finding that Lomond had breached its duty to Railwater.
Lomond concedes that the evidence can be read to support
a finding that Lomond made inappropriate charges to the joint
venture. As noted above, the record further provides evidence that
Railwater was not aware that these charges were being made and
would have acted differently had this information been
communicated. The evidence more than adequately supports the
jury's finding that Lomond breached its fiduciary duty to Railwater
and that Railwater suffered damage as a result.
2. Amount of damages
Lomond further contends that even if Railwater
demonstrated that Lomond's conduct resulted in a loss to Railwater,
there was inadequate evidence to support the damage award of
$348,000. We agree, and remand for determination of damages.
We have previously held that a plaintiff alleging breach
of contract must present evidence sufficient to calculate the
amount of the loss caused by the breach. City of Palmer v.
Anderson, 603 P.2d 495, 500 (Alaska 1979). The plaintiff "need not
prove the amount of damages with exact detail, but the evidence
must provide a reasonable basis for the jury's determination."
Id.; see also City of Whittier v. Whittier Fuel & Marine Corp., 577
P.2d 216, 222 (Alaska 1978) (footnote omitted) (holding that
damages award cannot be based on speculation, although exactness is
not necessary as long as jury has a reasonable basis on which to
compute its award); Dowling Supply & Equip. v. City of Anchorage,
490 P.2d 907, 909-10 (Alaska 1971) (holding that although rule
against recovery of uncertain damages is generally directed against
uncertainty regarding cause rather than extent of damages, some
competent evidence as to amount of damages must be introduced).
In this case the evidence did not provide a reasonable
basis for the amount of damages. In order to justify an award to
Railwater of $348,000, Railwater had to show that the joint venture
suffered damages totaling twice that amount, or $696,000.
Railwater suggests two evidentiary sources that would have
permitted the jury to determine that the joint venture suffered
damages of at least $696,000. Neither source provides a foundation
definite enough to support the judgment.
First, Railwater notes that it entered into evidence
several accounting documents detailing the expenses, both proper
and allegedly improper, of the joint venture. Counsel for
Railwater did not provide the sum of the allegedly improper
expenses at trial or on appeal, nor did Railwater separate the
entries on those exhibits into proper and improper charges.
However, even if the jury included every expense Railwater claimed
to be improper, the allegedly unauthorized charges included in
these documents do not add up to $696,000. While the allegedly
unauthorized charges total nearly $348,000, this sum represents the
total damages suffered by the joint venture. As one of two joint
venture partners, Railwater can only claim one-half of those
damages. Accordingly, these exhibits could justify an award only
about half the size of that reached by the jury. Railwater has
made no effort to demonstrate how the jury could have arrived at a
sum of $348,000 in calculating the damages suffered by Railwater.
Having reviewed the exhibits upon which Railwater relies, we see no
reasonable basis to conclude that Lomond's misappropriations harmed
the joint venture in an amount greater than $348,000, at most.
Railwater contends that because the accounts were
prepared by Lomond's accountant, the jury may have chosen to
disbelieve the figures contained in the exhibits and increased the
award to compensate. However, in the absence of any evidence
regarding the nature or magnitude of any inaccuracy in the
accounts, such an adjustment would constitute the sort of
speculation we have held to be unacceptable. See Whittier Fuel &
Marine Corp., 577 P.2d at 224 (requiring reasonable basis from
which a jury can calculate damage figure).
The same is true of the second evidentiary basis
Railwater offers for the jury's award: Schwartz's estimate of the
profits the joint venture should have realized. Schwartz testified
at trial that according to his experience in salvage operations,
the joint venture should have realized a profit of "close to two
million dollars." Railwater did not, however, provide any evidence
suggesting how or to what extent Lomond's alleged breach of
fiduciary duty affected that profit. Moreover, Schwartz's
testimony was based on no more than his "background in the salvage
industry,"yet he conceded that the joint venture was "an unusual
deal."(EN2)
Especially in light of Schwartz's own misappropriation,
and the effect it might have had on the joint venture's profits,
this testimony did not provide an adequate evidentiary basis
sufficiently free from speculation to support the jury's award. As
we have stated before, "[t]he evidence must afford sufficient data
from which the court or jury may properly estimate the amount of
damages, which data shall be established by facts rather than by
mere conclusions of witnesses." Whittier Fuel & Marine Corp., 577
P.2d at 223 (quoting Levene v. City of Salem, 229 P.2d 255, 263
(Or. 1951)).
We therefore remand for redetermination of the damages to
be awarded to Railwater.
IV. CONCLUSION
We REVERSE, and REMAND for determination of the amount of
damages suffered by Railwater as a result of Lomond's breach of
fiduciary duty. We AFFIRM the superior court's decisions in all
other respects.
ENDNOTES:
1. Lomond also cursorily challenges Jury Instruction No. 13.
However, Lomond never objected to that instruction at trial. It
was not plain error to give that instruction, nor does Lomond argue
that it was. Therefore we will not consider whether it was error
to give the instruction. See Alaska Civil Rule 51(a); Conam Alaska
v. Bell Lavalin, 842 P.2d 148, 153 (Alaska 1992).
2. Cf. Geolar, Inc. v. Gilbert/Commonwealth Inc. of Mich., 874
P.2d 937, 946 (Alaska 1994) (holding that when plaintiff had no
prior experience with contracts of similar size and complexity,
offered no evidence of its own profit margins on other projects,
and offered no evidence of profits obtained by other contractors
performing similar jobs, plaintiff's own testimony regarding
expected profits was too speculative to support an award).
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