Apr. Beguesse, Inc. v. Kenneth Rammell, an Individual, Christa Beguesse, Inc.

• Decision Date: 18 June 2014
• Docket Number: No. 40212.,40212.
• Citation: 328 P.3d 480,156 Idaho 500
• Court: Idaho Supreme Court
• Parties: APRIL BEGUESSE, INC., an Idaho corporation, Plaintiff–Counterdefendant–Respondent, v. Kenneth RAMMELL, an individual, Christa Beguesse, Inc., an Idaho corporation, The Estate of Christa Beguesse Rammell, by its qualified personal representative, Kenneth Rammell, Defendants–Counterclaimant–Appellants.

156 Idaho 500

328 P.3d 480

APRIL BEGUESSE, INC., an Idaho corporation, Plaintiff–Counterdefendant–Respondent,

v.Kenneth RAMMELL, an individual, Christa Beguesse, Inc., an Idaho corporation, The Estate of Christa Beguesse Rammell, by its qualified personal representative, Kenneth Rammell, Defendants–Counterclaimant–Appellants.

No. 40212.

Supreme Court of Idaho, Idaho Falls, May 2014 Term.

June 18, 2014.

Racine, Olson, Nye, Budge & Bailey, Pocatello, attorneys for appellants. David E. Alexander argued.

Beard St. Clair Gaffney, Idaho Falls, attorneys for respondent. Jeffrey D. Brunson argued.

W. JONES, Justice.

I. NATURE OF THE CASE

This appeal arises from a fraud, breach of contract, and breach of warranty action brought by April Beguesse, Inc. (ABI) against Kenneth Rammell (Rammell), the estate of Christa Beguesse (Christa), and Christa Beguesse, Inc. (CBI) (collectively Defendants) and a breach of contract counterclaim brought by CBI against ABI. The parties went to trial and the jury returned a verdict in favor of ABI on all claims. Defendants moved for a judgment notwithstanding the verdict (JNOV) or in the alternative a new trial. The district court granted Defendants' motion for JNOV on the finding of fraud by Christa's estate and dismissed that claim. The district court also granted Defendants a new trial on the issue of damages unless ABI accepted a remittitur for damages assessed against CBI only. The district court denied Defendants' motion on the remaining claims of breach of contract, breach of warranty, and fraud. ABI accepted the remittitur. Defendants appeal the district court's denial of their motion. Defendants also seek a reversal of the district court's judgment or in the alternative a new trial on their counterclaim. They raise one evidentiary error. We affirm the judgment of the district court.

II. FACTUAL AND PROCEDURAL BACKGROUND

In 1996, Christa and her husband Rammell incorporated CBI in Idaho. CBI provided typesetting services to The Rutter Group (Rutter), a legal publisher. Christa and Rammell each owned fifty percent of stock in CBI with Christa as the president and Rammell as the secretary and treasurer. Christa did almost all of the typesetting work and had extensive knowledge and expertise in the field due to her years of experience. Rammell occasionally did accounting for CBI, but the parties agree that Rammell had limited involvement in the business.

In 1999, Rammell and Christa met with an attorney for estate planning purposes. Rammell and Christa valued CBI at $40,000. The parties agree that the value of the business reflected Rammell and Christa's belief that CBI would have little value without Christa because Christa was the sole typesetter for CBI and she never trained anyone else to do the work.

In November of 2001, Rammell and Christa approached Christa's daughter April Beguesse (April) to purchase CBI after first spending two years working closely with Christa to learn the business. April agreed. April would work for CBI from 2002 to 2004, and in 2004 April would take over the business and pay CBI $12,000 a month for eight years, a total of $1,152,000. In exchange for the monthly payments, April believed that she would get consulting and assistance from Christa, CBI's office equipment, ownership of a library of computer files, and proprietary software developed by Christa. Christa and Rammell told April that she could sell the business in the future in a similar way that CBI would be sold to her. April believed that CBI owned the library of computer files, which CBI used to typeset for Rutter's publications specifically, and she believed that the library of files was valued at 1 to 1.3 million dollars. At trial April testified that she relied on Rammell's statements as to the value of the library of files and CBI's ownership of the files. April also believed that the proprietary software had unique codes created by Christa for efficient typesetting within a computer software program called PageMaker. April testified at trial that Christa told her that she created the proprietary software and that Christa made a similar statement during an Idaho Falls Exchange Club presentation. April testified that she did not know that Rammell had stock in CBI. She stated that she would not have agreed to purchase CBI if she knew Rammell was an owner or if she knew CBI did not own the library of files.

On January 6, 2002, April began working for CBI. On January 7, 2002, April sent a letter to Rutter's editor-in-chief Linda Diamond Raznick to introduce herself and announce that she would be joining CBI. From January 6, 2002, to May of 2004, Christa trained April to typeset with the PageMaker software. In January of 2004, April transitioned CBI's typesetting business to ABI, and ABI began making monthly payments of $12,000 to CBI. On October 6, 2004, ABI and CBI signed a lease agreement.¹ ABI frequently hired Christa for consulting work.

In November of 2006, April studied the PageMaker manual for the first time during an update of the software. She learned that the proprietary software actually was provided by PageMaker. Christa had not developed any unique codes for typesetting.

ABI continued to make monthly payments to CBI through November of 2008. On November 10, 2008, Christa died unexpectedly, and ABI stopped making payments to CBI. In total, ABI had paid CBI 59 monthly payments of $12,000, totaling $708,000, and $50,000 in consulting fees to Christa. According to Rammell, ABI owed CBI 37 more payments of $12,000, totaling $444,000, to fulfill the eight-year agreement. Christa's 2007 holographic will left her entire estate to Rammell.

After Christa's death in late 2008, April contacted Raznick and learned that Rutter owned the library of files. Raznick told April that ABI could not sell the library of files upon April's retirement. April explained at trial that the ownership of the library was significant because she "thought the Rutter Group needed us just as much as we needed them .... and because of that, there was no need to even think about going anyplace else." It became a "big time" concern for her that Rutter "could take the business away." Raznick's testimony corroborated April's understanding of the ownership of the library of files. Raznick testified that Rutter paid CBI and ABI to house the files on their servers, but Rutter owned the files and ABI could not sell the business without Rutter's approval. Raznick explained that she could not give assurances to CBI that Rutter would continue to do business with ABI when CBI sold the business. In March of 2009, April relocated ABI to Nevada.

On May 8, 2009, ABI filed a suit in Bonneville County against Rammell, Christa's estate, and CBI seeking declaratory relief and raising claims of fraud, constructive fraud, breach of contract, breach of express warranty, breach of implied warranty, unjust enrichment, and quasi-estoppel. CBI filed a counterclaim against ABI for breach of contract, unjust enrichment, constructive trust, and violation of the Uniform Trade Secrets Act.

After the district court resolved some of the parties' claims on summary judgment, the parties went to trial. ABI presented three claims: (1) fraud by Rammell, Christa's estate, and CBI; (2) breach of contract by CBI; and (3) breach of express warranty by CBI. For the fraud claim, ABI alleged that Rammell and Christa individually and on behalf of CBI knowingly made fraudulent material representations to induce ABI into the purchase agreement with CBI. Those representations were that (1) CBI owned a library of files worth at least one million dollars; (2) CBI owned proprietary software unique to CBI's business; and (3) the payments would cease in the event of Christa's death within the eight-year payment period. For the breach of contract claim, ABI alleged that CBI promised to assign or sell to ABI the library of files and proprietary software in exchange for the payments. For the breach of warranty claim, ABI alleged that CBI expressly warranted that CBI could transfer ownership of the library of files and proprietary software to ABI and that these warranties were material terms of the contract. CBI presented a breach of contract counterclaim against ABI. CBI alleged that ABI breached the purchase agreement by failing or refusing to continue the monthly $12,000 payments after Christa's death.

April offered testimony on the value of the business at trial. She valued the furniture and office equipment at $3,500 and the PageMaker software at $600. In her opinion, the value of the business when it became ABI in 2004 was $250,000, excluding the equipment and PageMaker software. That value included mentoring by Christa, such as "[g]etting up to speed on the processes, the production work flow ... [and] things that had changed." April placed "no value" on the library of files. She did not believe that she could "ethically" sell the business to a third party because she did not believe that she had anything to sell without ownership of the files. She could not "in good faith" guarantee a third party that Rutter would work with them and "sell anything tangible to somebody." She also explained that she could not successfully sell the business like Christa sold it to her because she bought the business with the belief that she could charge Rutter for return of the files and now she knows that she would have to return the files at no charge.

Rammell also testified at trial. He denied making an agreement with April that ABI's payments would cease on anyone's death. He testified that he told April that she could sell the business in the same way that he and Christa were selling it to her. He explained that he calculated the $12,000 monthly payments to obtain a little over one million dollars to retire and provide an income for April. He acknowledged that CBI would not be worth anything if Rutter took its business elsewhere, but stated that ABI would have to pay CBI even if Rutter...