AON RISK SERV. v. COMMERCIAL MILITARY SYS.

• Decision Date: 05 November 2004
• Docket Number: No. A04A0917., No. A04A0913
• Citation: AON RISK SERV. v. COMMERCIAL MILITARY SYS., 607 S.E.2d 157, 270 Ga. App. 510 (Ga. App. 2004)
• Parties: AON RISK SERVICES, INC. OF GEORGIA et al. v. COMMERCIAL & MILITARY SYSTEMS COMPANY, INC. Commercial & Military Systems Company, Inc. v. Aon Risk Services, Inc. of Georgia.
• Court: Georgia Court of Appeals

607 S.E.2d 157

270 Ga. App. 510

AON RISK SERVICES, INC. OF GEORGIA et al. v. COMMERCIAL & MILITARY SYSTEMS COMPANY, INC.

Commercial & Military Systems Company, Inc. v. Aon Risk Services, Inc. of Georgia.

Nos. A04A0913, A04A0917.

Court of Appeals of Georgia.

November 5, 2004.

Reconsideration Denied November 19, 2004.

Certiorari Denied March 28, 2005.

Alston & Bird, Theodore J. Sawicki, Scott P. Hilsen, Regina S. Molden, Smith, Currie & Hancock, John E. Menechino, Mark E. Farrell, Jr., Duc T. Tran, Atlanta, for Aon Risk Services, Inc. et al.

Hull, Towill, Norman, Barrett & Salley, Edward J. Tarver, Patrick C. Smith, Jr., Thomas L. Cathey, Benjamin F. McElreath, Augusta, for Commercial & Military Systems Co., Inc.

MILLER, Judge.

Commercial & Military Systems Company, Inc. (CMS) sued Aon Risk Services, Inc. of Georgia (Aon) and Frontier Insurance Company (Frontier) for breach of an oral contract, fraud, and violation of Georgia's Racketeer Influenced and Corrupt Organizations (RICO) Act. The trial court granted summary judgment to Aon on CMS's RICO and fraud claims. The proceedings were stayed as against Frontier because it was in receivership in New York. A jury trial was held on the remaining claim of breach of contract, and the jury awarded CMS lost profit damages in the amount of $1,175,000. In Case No. A04A0913, Aon appeals, arguing that the trial court erred in (1) allowing hearsay, (2) allowing certain expert testimony, (3) allowing the jury to consider lost profits, and (4) instructing the jury on fiduciary relationships. In Case No. A04A0917, CMS appeals from the grant of Frontier's motion to stay and the grant of Aon's motion for summary judgment.

In 1996, CMS, a seller of heavy-duty trucks, entered into a contract with the government of Venezuela to manufacture 450 military trucks for use by the Venezuelan army. CMS entered into a second contract in 1998 with the Venezuelan government to supply spare parts for trucks previously manufactured by CMS. Venezuela required CMS to obtain a performance bond for the 1996 contract and warranty bonds for both the 1996 and 1998 contracts. Aon, a brokerage commercial insurance firm, agreed to assist in posting the needed warranty bonds for both contracts once CMS paid the required $100,000 premium. Aon used Frontier, an insurance company that sold Aon products, to post the bonds. Frontier was not authorized to do business in Venezuela and hired a "fronting agent," Seguros Caracas de Liberty Mutual (Seguros), to post the bonds. Following receipt of CMS's premium for the bonds, Aon authorized Frontier to post the bonds and Frontier sent a hold-harmless letter to Seguros. CMS later received letters purportedly from the Venezuelan government claiming that the warranty bonds had not been posted. Aon made several attempts to contact Seguros to inquire about the bonds, but got no response. CMS then requested a return of the premium it paid to secure the warranty bonds. Frontier informed Aon that in order for CMS to get its premium returned, it had to obtain a letter from Seguros that the bonds were not posted. CMS did not provide such a letter, and Aon did not return the premiums paid by CMS.

There was also evidence presented at trial that CMS sought to rescind its vehicle and parts contracts due to Venezuela's nonpayment. Finally, CMS claimed that it suffered damages due to Venezuela's failure to get its letter of credit extended. CMS sent a letter to Venezuela stating that it was exercising its right to cancel the contracts.

Case No. A04A0913

1. Aon first contends that the trial court erred in admitting letters purportedly from the Venezuelan government. Specifically, Aon argues that because the letters were not authenticated and did not fall with the business records exception to the hearsay rule, they should not have been admitted for the truth of the matters asserted therein. During trial CMS sought to admit seven letters, written in Spanish,¹ purportedly bearing the seal of the Venezuelan government. Several of these letters notified CMS that Venezuela had not received the required warranty bonds. The trial court admitted each of the letters for the truth of the matters asserted therein.

Under OCGA § 24-3-14(b),

[a]ny writing or record ... made as a memorandum or record of any act, transaction, occurrence, or event shall be admissible in evidence in proof of the act, transaction, occurrence, or event, if the trial judge shall find that it was made in the regular course of any business and that it was the regular course of such business to make the memorandum or record at the time of the act, transaction, occurrence, or event or within a reasonable time thereafter.

(Emphasis supplied.) For a writing to be admissible under OCGA § 24-3-14(b), a foundation must be laid through the testimony of a witness indicating that he is familiar with the method of keeping the records. Massey v. State, 269 Ga.App. 152, 154 603 S.E.2d 431 (2004). The witness must also be able to testify that the record was made in the regular course of business, at the time of the event or within a reasonable time of the event. Id. Letters are incompetent as hearsay without the author being available for cross-examination and are generally not business records. Fletcher v. State, 199 Ga.App. 756-757, 406 S.E.2d 245 (1991).

Here, the author was not available for cross-examination, and there was no witness to verify Venezuela's method of keeping records. Thus the trial court abused its discretion when it admitted the letters en masse when there was no possibility that any witness could provide the required testimony. Moreover, the error in admitting the letters was harmful, since they provided the only evidence that the warranty bonds had in fact not been posted. The magnitude of both the error and its consequences requires a new trial in this case.

2. In light of our holding in Division 1, Aon's claim that it did not receive notice of CMS's new expert opinion is moot.

3. Aon also enumerates as error (1) the trial court's charge to the jury on agency and (2) the denial of its directed verdict on CMS's claim for lost profits. Although Division 1 requires a new trial, the issues raised by these enumerations are likely to occur on retrial. We will therefore address them here.

(a) Although there was evidence presented at trial that Frontier was an agent of Aon, Frontier was no longer a party to the action. At the close of evidence, and as the jury considered whether Aon was CMS's agent, the court charged the jury thoroughly on principal/agent relationships, including an agent's fiduciary duty. Aon argues that the instruction was in error because the evidence showed only an arm's length transaction between Aon and CMS.

An agency relationship arises when "one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf." OCGA § 10-6-1; see also Atlanta Market Center Mgmt. Co. v. McLane, 269 Ga. 604, 606(1)(a), 503 S.E.2d 278 (1998). Here the evidence showed that Aon orally agreed to secure the posting of certain bonds for CMS upon CMS's payment of a $100,000 premium. There is no evidence of a confidential relationship between the two parties beyond the contractual obligation. See OCGA § 23-2-58 (confidential relationship of "utmost good faith" arises in principal/agent relationship). Aon did not act on CMS's behalf in any business transactions and was obligated only to secure the posting of the needed bonds. This was nothing more than an arm's length transaction. "In the majority of business dealings, opposite parties have trust and confidence in each other's integrity, but there is no confidential relationship by this alone." (Citation and punctuation omitted.) First Union Nat. Bank of Ga. v. Gurley, 208 Ga.App. 647, 649(1), 431 S.E.2d 379 (1993).

Since the jury was considering only whether Aon breached its contract with CMS, the court's instructions had to be directed to the question whether Aon owed CMS a fiduciary duty. We therefore hold that the trial court's charge to the jury on agency and fiduciary relationships was error. Compare Taylor v. Smith, 159 Ga.App. 797, 799(4), 285 S.E.2d 200 (1981) (court did not err in charging the jury on agency where the evidence showed an agency relationship between real estate broker and the owner of real estate).

(b) Aon contends that the trial court erred in denying its motion for directed verdict on the issue of lost profits. "If any evidence supports the trial court's denial of a motion for directed verdict, this court may not disturb the jury's verdict." (Citation omitted.) Rome Healthcare v. Peach Healthcare System, 264 Ga.App. 265, 268(2), 590 S.E.2d 235 (2003). Aon argues that CMS (1) did not show that its lost profit damages were the result of Aon's breach, and (2) did not offer evidence showing with reasonable certainty that it suffered lost profits. It is true that "profits which can be traced solely to a breach of contract and are the immediate fruit of the contract, independent of any collateral enterprise, are recoverable." Signsation, Inc. v. Harper, 218 Ga.App. 141, 143(2), 460 S.E.2d 854 (1995), citing OCGA § 13-6-8. However, "there can be no recovery on a claim for loss of expected profits except where such loss can be shown with reasonable certainty." (Punctuation and footnote omitted.) Pendley Quality Trailer Supply v. B & F Plastics, 260 Ga.App. 125, 128(2), 578 S.E.2d 915 (2003). CMS presented evidence that the lost profits for the 1998 Spare Parts Contract totaled approximately $515,000, based on the purchase order for those parts ($1,086,000) minus the cost of the parts and shipping. As there was some evidence of lost profits which could have been traced to Aon's failure to secure the posting of the bonds, the trial court did not err in denying the motion for directed verdict on this ground. See Freightliner Chattanooga v....