Bad Wound v. Lakota Community Homes, Inc.

• Decision Date: 29 December 1999
• Docket Number: No. 20929, No. 20936.
• Citation: 1999 SD 165,603 N.W.2d 723
• Parties: James D. BAD WOUND, Plaintiff and Appellant, v. LAKOTA COMMUNITY HOMES, INC., Defendant and Appellee.
• Court: South Dakota Supreme Court

603 N.W.2d 723

1999 SD 165

James D. BAD WOUND, Plaintiff and Appellant, v. LAKOTA COMMUNITY HOMES, INC., Defendant and Appellee.

Nos. 20929, 20936.

Supreme Court of South Dakota.

Argued October 20, 1999.

Decided December 29, 1999.

James D. Leach of Viken, Viken, Pechota, Leach & Dewell, Rapid City, South Dakota, Attorneys for plaintiff and appellant.

Paul S. Swedlund and Mark J. Connot of Gunderson, Palmer, Goodsell & Nelson, Rapid City, South Dakota, Attorneys for defendant and appellee.

AMUNDSON, Justice.

[¶ 1.] James Bad Wound (Bad Wound) appeals a judgment against Lakota Community Homes (LCH) claiming that the trial court erred in limiting the period of his recovery of damages to the three-year term of the employment contract. LCH appealed the trial court's denial of admission of Bad Wound's past habit and routine of nonconfusion during prior management transitions. We affirm.

FACTS

[¶ 2.] This is the second time that this case has come before this Court. Originally, we reversed the trial court's granting of summary judgment to LCH and remanded the action for trial.¹ A more detailed discussion of the facts surrounding this case is found in our prior decision. This case originated out of the termination of Bad Wound from LCH for insubordination and neglect of duties and his subsequent filing against LCH of a wrongful termination action. Following a trial, the jury returned a verdict in favor of Bad Wound for $49,983, the wages due for the remainder of Bad Wound's contract, offset by his wages earned at his new job. In deciding its damages award, the jury was not allowed to consider Bad Wound's possible future employment with LCH. Therefore, the jury's damage calculation was limited to the three-year contract term. At trial, LCH was disallowed by the court from attacking Bad Wound's credibility by presenting habit evidence of LCH's prior transitions and Bad Wound's failure to claim confusion on any of those transitions.

[¶ 3.] On appeal, Bad Wound raises the following issue:

1. Whether the trial court erred in limiting the period of Bad Wound's recovery of damages to the three-year term of the contract?

[¶ 4.] On cross-appeal, LCH raises the following issue:

2. Whether the trial court erred in excluding LCH's evidence of past habit and routine?

DECISION

[¶ 5.] 1. Whether the trial court erred in limiting the period of Bad Wound's recovery of damages to the three-year term of the contract?

[¶ 6.] Whether to allow the jury to consider damages beyond the contract term is an evidentiary ruling. Our standard of review of "a trial court's evidentiary ruling is that of abuse of discretion." State v. Bailey, 1996 SD 45, ¶ 34, 546 N.W.2d 387, 394 (citations omitted). An abuse of discretion is "`discretion exercised to an end or purpose not justified by, and clearly against, reason and evidence.'" Larson v. Kreiser's, Inc., 472 N.W.2d 761, 764 (S.D.1991) (quoting Gross v. Gross, 355 N.W.2d 4, 7 (S.D.1984)).

[¶ 7.] At trial, Bad Wound was requesting damages for his entire work life expectancy, an indeterminate period of time which would extend beyond the expiration of his current written contract term. His justification for this claim of damages was based upon alleged comments by the Board during oral contract negotiations. Bad Wound contends that prior to his signing of the three-year contract, the Board stated that if at the end of the three years an employee was doing his job then the contract can be renewed for another three years. Bad Wound interpreted these statements to have granted to him lifetime employment with LCH.

[¶ 8.] The issue of damages under a contract of employment is well settled. See Nelson v. WEB Water Dev. Ass'n, Inc., 507 N.W.2d 691, 696 (S.D.1993)

. This Court has noted that "[n]o person may recover a greater amount in damages for the breach of an obligation than he could have gained by full performance on both sides[.]" Id.(citing SDCL 21-1-5).

[¶ 9.] This Court has often stated that "`[i]n an action for breach of contract, the plaintiff is entitled to recover all his detriment proximately caused by the breach, not exceeding the amount he would have gained by full performance.'" Ducheneaux v. Miller, 488 N.W.2d 902, 915 (S.D.1992) (quoting Regan v. Moyle Petroleum Co., 344 N.W.2d 695, 696 (S.D. 1984); Big Band, Inc. v. Williams, 87 S.D. 24, 28, 202 N.W.2d 121, 123 (1972)). The ultimate goal in awarding damages for breach of contract is to "place the injured party in the position he or she would have occupied if the contract had been performed." Id.. (citing Macal v. Stinson, 468 N.W.2d 34, 36 (Iowa 1991)). See also Mash v. Cutler, 488 N.W.2d 642, 646 (S.D. 1992)

(noting that in actions for breach of contract, "the plaintiff is entitled to recover all his deteriment proximately caused by the breach, not exceeding the amount he would have gained by full performance"); Regan, 344 N.W.2d at 696 (emphasizing that the plaintiff's recovery shall not exceed "the amount he would have gained by full performance").

[¶ 10.] In the present case, Bad Wound argues that Restatement (Second) of Contracts § 347 (1981) allows recovery of damages beyond the three-year contract term. The Restatement states:

Subject to the limitations stated in §§ 350-52, the injured party has a right to damages based on his expectation interest as measured by

(a) the loss in value to him of the other party's performance caused by its failure or deficiency, plus

(b) any other loss, including incidental or consequential loss, caused by the breach, less

(c) any cost or other loss that he has avoided by not having to perform.

Bad Wound contends that his "incidental or consequential loss" would include his loss of earnings after June 30, 1998. Bad Wound argues that, based upon Board's gratuitous oral comments which were not incorporated into the final written contract, his employment would be for as long as he was willing to remain as their employee. Therefore, application of § 347 would allow him to recover an amount equal to the difference between his wages of $13.00 from LCH and his wages of $7.82 from his new employment for the rest of his working life.

[¶ 11.] Bad Wound cites Lex K. Larson, Unjust Dismissal § 9A.02[1], as authority for his argument that the application of Restatement (Second) of Contracts § 347 should allow him to recover damages beyond the three-year contract term. Notably, Larson mentions § 347 in the "contract remedies in general section," but fails to discuss the section in the "application to employment contracts" section. Larson notes:

Remedies for the breach of an employment contract follow the same general pattern as the remedies for the breach of any other contract: the remedies are designed to protect the expectations of the parties when they entered into the legally binding agreement. Thus, if an employee is working under a definite term contract but is dismissed before the expiration of the term, damages in the form of lost wages will be computed from the time of discharge to the end of the contract term.

Id. at § 9A.02[2] (citing Raytheon Subsidiary Support Co., Inc. v. Crouch, 548 So.2d 781 (Fla.Dist.Ct.App.1989); Berutti v. Dierks Foods, Inc., 145 Ill.App.3d 931, 99 Ill.Dec. 775, 496 N.E.2d 350 (1986). See also Ward v. American Mut. Liab. Ins. Co., 15 Mass.App.Ct. 98, 443 N.E.2d 1342 (1983)

(awarding employees in a breach of express employment contract all wages they would have earned until the end of the contract term).

[¶ 12.] An employment case which dealt with claimed future loss of income is Lindsey v. University of Arizona, 157 Ariz. 48, 754 P.2d 1152 (Ariz.App.1987). In Lindsey, Lindsey was hired as head men's basketball coach for the University of Arizona. Id. at 1154. Lindsey had been orally informed that "no one would be hired for the coaching position for less than three to four years" and "it was University policy to give coaches a minimum of four years before being evaluated." Id. Despite the oral assertions, the only expressly written term of employment for Lindsey was provided in a letter from the president of the university specifying his employment as "effective July 1, 1982 and ending no later than June 30, 1983"; a term of employment for one year. Id. At the completion of the first season, Lindsey was notified that his contract would not be renewed. Id. at 1155. Lindsey brought suit against the University and was awarded $215,000 for deprivation of his three-year employment and $480,000 for decrease in Lindsey's future earning capacity. Id. at 1156. In reversing the damage award for decrease in future earning capacity, the court noted that "[d]amages for diminution in future earning power or capacity are not recoverable in an action for breach of an employment contract." Id. at 1158. In addition, it is "`well settled that the only damages which may be recovered by an employee who has been wrongfully discharged is the balance of the salary due under the employment contract less any sums the employee was able to earn during the remainder of the contract period.'" Id. (quoting Perry v. Apache Junction Elementary Sch. Dist. No. 43, 20 Ariz.App. 561, 514 P.2d 514, 516 (Ariz.App.1973)). The court in Lindsey noted that damages for decrease in future earning capacity was too speculative. Id.

[¶ 13.] Bad Wound's reliance on Restatement (Second) of Contracts § 347 is in essence a request for recovery of tort damages in this contract action. The trial court properly instructed the jury based upon the settled law of this state for determination of contract damages.

[¶ 14.] 2. Whether the trial court erred in excluding LCH's evidence of past habit and routine?

[¶ 15.] This issue, raised by LCH, is also an appeal of an evidentiary ruling. Therefore, we apply the same standard of review as applied in issue one. LCH proposed to offer evidence at trial that on eight prior managerial transitions during Bad Wound's seventeen years of employment with LCH, he never...