Hockenberg Equipment Co. v. Hockenberg's Equipment & Supply Co. of Des Moines, Inc.
| Decision Date | 22 December 1993 |
| Docket Number | No. 92-1725,92-1725 |
| Citation | 510 N.W.2d 153 |
| Parties | HOCKENBERG EQUIPMENT COMPANY, Appellee, v. HOCKENBERG'S EQUIPMENT & SUPPLY COMPANY OF DES MOINES, INC., Hockenbergs Equipment & Supply Company, Inc., and Becker Equipment Company, Appellants. |
| Court | Iowa Supreme Court |
William J. Schadle, West Des Moines, for appellants.
David A. Tank and Diane M. Stahle, Des Moines, of Davis, Hockenberg, Wine, Brown, Koehn & Shors, P.C., for appellee.
Considered by McGIVERIN, C.J., and LARSON, CARTER, SNELL, and TERNUS, JJ.
This appeal arises out of a settlement contract between two competing restaurant equipment suppliers that limited the kind of advertising and marketing in which the defendants could engage. The defendants, conceding that they breached the contract, appeal the district court's award to plaintiff of punitive damages, a permanent injunction, and attorney fees. We affirm in part and reverse in part.
I. Background facts and proceedings. During the 1960s and 1970s, Hockenberg Fixtures and Supply Company did business in Omaha, Des Moines, and Davenport as a commercial food service and equipment concern. After a series of commercial transformations, two groups emerged out of the old Hockenberg company. The first consisted of defendants Hockenberg's Equipment & Supply Company of Des Moines, Inc., Hockenbergs Equipment & Supply Company, Inc., and Becker Equipment Company ("Omaha Hockenbergs"). The second was plaintiff Hockenberg Equipment Company ("Des Moines Hockenbergs").
Both the Omaha Hockenbergs and the Des Moines Hockenbergs remained in the restaurant equipment supply business. In 1989 the Omaha Hockenbergs began doing business in central Iowa, selling to many of the Des Moines Hockenbergs' customers. This apparently caused some customers to confuse the Omaha Hockenbergs with the Des Moines Hockenbergs. Therefore, plaintiff Des Moines Hockenbergs filed a lawsuit on April 4, 1990, alleging common law trade name infringement and seeking temporary and permanent injunctions to prohibit the Omaha Hockenbergs from doing business under the Hockenberg name in central Iowa. The parties resolved this lawsuit by way of a Settlement Agreement and Mutual Release ("settlement agreement") entered into December 30, 1990.
In the settlement agreement, defendant Omaha Hockenbergs agreed that they would no longer do business in central Iowa using the words "Hockenberg" or "Hockenberg's" as any part of their business name. The defendants also agreed that if they mailed any promotional materials into Iowa from Nebraska, they would include a disclaimer in a specified typeface to let potential customers know that the defendants had no affiliation with plaintiff Des Moines Hockenbergs. The defendants further agreed that any breach of the agreement would result in "great and irreparable harm" to the Des Moines Hockenbergs. Such breach, the agreement stated, would leave the Des Moines Hockenbergs with no adequate remedy at law and would therefore entitle them to injunctive relief against the Omaha Hockenbergs.
Despite this agreement, the Omaha Hockenbergs continued to send materials into central Iowa using the Hockenberg name without the proper disclaimer.
Plaintiff Des Moines Hockenbergs therefore brought the present suit for damages against the Omaha Hockenbergs and obtained a temporary injunction against their breach of the settlement agreement's terms. The Omaha Hockenbergs, however, continued to violate the terms of the agreement up to the time of trial.
Some aspects of the present action were tried at law to a jury and some in equity to the court.
After trial, the jury found by special verdict that the Omaha Hockenbergs breached their contract with plaintiff Des Moines Hockenbergs and awarded plaintiff one dollar in compensatory damages.
The jury further found that the conduct of the defendants constituted willful and wanton disregard of the rights of another but that the defendants did not direct this conduct specifically at the plaintiff. In response to the plaintiff's motion for judgment notwithstanding the verdict, the district court later set aside this portion of the verdict, ruling that if the defendants had engaged in wrongful conduct, it was directed specifically at the plaintiff.
On the basis of its finding of willful and wanton conduct by the defendants, the jury awarded, and the court granted judgment to the plaintiff for, a total of $5000 in punitive damages. The district court also issued a permanent injunction against the Omaha Hockenbergs forbidding them from breaching the terms of the settlement agreement. Finally, because of the jury's finding of willful and wanton conduct, the district court awarded attorney fees to the plaintiff. The court denied defendants' posttrial motions for a new trial and judgment notwithstanding the verdict.
On appeal, defendants Omaha Hockenbergs contend that the district court erred (1) in allowing the jury to award the plaintiff punitive damages and entering judgment on an excessive verdict; (2) in granting injunctive relief against defendants; and (3) in granting plaintiff's motions for attorney fees.
II. Punitive Damages. Defendants Omaha Hockenbergs assert that the trial court erred in allowing the jury to consider awarding plaintiff punitive damages. They argue that no legal basis existed for such an award, and even if one did, the jury's award in this case impermissibly exceeded its award of actual damages. We disagree.
Our review of this matter is for correction of errors at law. Iowa R.App.P. 4. When reviewing defendants' motion for judgment notwithstanding the verdict, we ask
whether [the] evidence, taken in the light most favorable to the party resisting the motion, regardless [of] whether the evidence was contradicted, and taking every legitimate inference that might be fairly or reasonably deducted therefrom, showed that the movant was entitled to a directed verdict at the close of all evidence.
Suss v. Schammel, 375 N.W.2d 252, 255 (Iowa 1985); Iowa R.Civ.P. 243(b).
A. We first consider the legal basis for the jury's punitive damage award. Under Iowa Code section 668A.1 (1991), to receive punitive damages, plaintiff must prove by a preponderance of clear, convincing, and satisfactory evidence that the defendant's conduct amounted to a willful and wanton disregard for the rights of another. Thus, merely objectionable conduct is insufficient to meet the standards of section 668A.1. Beeman v. Manville Corp. Asbestos Disease Compensation Fund, 496 N.W.2d 247, 255 (Iowa 1993). To receive punitive damages, plaintiff must offer evidence of defendant's persistent course of conduct to show that the defendant acted with no care and with disregard to the consequences of those acts. Id.
Defendants Omaha Hockenbergs correctly point out that a breach of contract alone, even if intentional, will not form the basis for punitive damages. Suss, 375 N.W.2d at 255. But we will uphold an award of punitive damages when conduct breaching a contract also constitutes an intentional tort, committed maliciously, that meets the standards of section 668A.1. Cf. Pogge v. Fullerton Lumber Co., 277 N.W.2d 916, 919-20 (Iowa 1979) (pre-section 668A case).
An award of actual damages, however, is not necessary to support an award of punitive damages. Pringle Tax Serv., Inc. v. Knoblauch, 282 N.W.2d 151, 154 (Iowa 1979). The plaintiff need only show that the defendant actually caused plaintiff some injury to sustain a verdict for nominal compensatory damages (for example, one dollar) and punitive damages. Id. at 153-54; see Sundholm v. City of Bettendorf, 389 N.W.2d 849, 853 (Iowa 1986) ().
The jury in this case found that defendants breached their contract and awarded plaintiff one dollar in nominal damages. This award constitutes a showing of actual damages that the jury could supplement with a punitive damage award if it concluded that the defendants engaged in tortious conduct that rose to the standards of section 668A.1. Here, the jury found that the defendants indeed intentionally interfered with the plaintiff's prospective business advantage. The jury further concluded that defendants' tortious conduct amounted to the willful and wanton disregard of the rights of another. The court, in a judgment notwithstanding the verdict, set aside the jury's curious finding that the defendants' conduct was not directed specifically at the plaintiff. That ruling has not been assigned as error on appeal by defendants.
We believe that the evidence substantially supports the conclusion that the plaintiff made a showing of actual damages. Defendants Omaha Hockenbergs' marketing activities in central Iowa caused confusion and lost staff time for the Des Moines Hockenbergs. Customers mistakenly sent them orders based on the sales information of the Omaha Hockenbergs, forcing the Des Moines Hockenbergs to devote their attention to resolving these problems. These interruptions amounted to some actual damage, which in turn provided sufficient ground for the jury to consider an award of punitive damages.
We further believe substantial evidence supported the amount of the award the jury made. The defendants not only breached the settlement agreement but also violated the district court's temporary injunction that the court granted when the plaintiff filed its petition. Moreover, the record contains substantial evidence of the Omaha Hockenbergs' persistent course of conduct in their refusal to abide by the settlement agreement or the injunction. This attitude was reflected in the testimony of Charles Becker, one of the principals of the Omaha Hockenbergs:
Q. Would you agree with me that the use of the form with the Hockenberg name on it violates that injunction?
A. To some degree I suppose it does.
....
Q. You knew what your forms were and you knew you couldn't...
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