Beaupre v. Kingen
| Decision Date | 10 October 1985 |
| Docket Number | Nos. 15489,15498,s. 15489 |
| Citation | 109 Idaho 610,710 P.2d 520 |
| Parties | John J. BEAUPRE, Plaintiff-Respondent-Cross Appellant, v. Gerald Robert KINGEN, Defendant-Appellant-Cross Respondent, and Douglas Betzold, Defendant. John J. BEAUPRE, Plaintiff-Respondent-Cross Appellant, v. Gerald Robert KINGEN, Defendant, and Douglas Betzold, Defendant-Appellant-Cross Respondent. |
| Court | Idaho Supreme Court |
Barry J. Luboviski, Ketchum, for appellant-cross-respondent kingen.
Michael F. Donovan, Ketchum, for appellant-cross-respondent Betzold.
Roger E. Crist, Ketchum, for respondent-cross-appellant.
This is an appeal by defendants-appellants Kingen and Betzold from a judgment against them in an action brought by plaintiff-respondent Beaupre. Beaupre had sued for moneys expended by him pursuant to an alleged oral agreement to employ attorneys to defend lawsuits against a corporation in which the three parties were the sole stockholders. We affirm.
Beaupre, Kingen and Betzold formed the Colo-Robin Corporation in March 1981, for the purpose of operating a franchised Red Robin restaurant in Aspen, Colorado. Each party contributed capital to the corporation. The three men borrowed funds from a local bank, each man executing a written personal guarantee for such loan. They then entered into lease agreements, and arranged for the payment of sales and payroll taxes. All agreements and arrangements were the subject of each party's written personal guarantee.
The restaurant opened in the summer of 1981. Betzold soon became unable to meet his share of contributions. An oral agreement was entered into between the parties, under which Beaupre and Kingen would cover the expenses and Betzold would execute promissory notes bearing interest in favor of Beaupre and Kingen to equalize the contributions.
The business fared poorly. Within a year, the corporation was unable to meet its obligations. The lending bank and the lessor of the business premises brought suit against the corporation and its stockholders as individuals for the unpaid indebtedness. Legal counsel was employed to defend those actions. When the lessor of the restaurant prevailed in its unlawful detainer action, the corporation was forced to close the restaurant. The corporation was then left with substantial liabilities to the bank, the equipment lessor, the Internal Revenue Service, and the attorneys.
Beaupre requested Kingen and Betzold to each pay one-third of the corporation's liabilities, but they refused. The law firm which had represented the corporation filed suit against the three shareholders for payment of its fees. Beaupre also requested Kingen and Betzold to each pay one-third of that cost, which was refused. Beaupre paid the attorneys in full for a bill of some $47,000, and that suit was dismissed. Beaupre then paid the corporation's other debts, approximately $193,000. Beaupre then filed action against Kingen and Betzold, seeking to recover one-third of his payments from each of Kingen and Betzold. Beaupre also sought punitive damages from Kingen and Betzold.
Summary judgment was entered in favor of Beaupre on his claims based on payments made to the lending bank and the lessors of the business premises. No appeal is taken on those issues, and therefore they are not presented here. The remainder of Beaupre's claims, insofar as they are relevant to this appeal, went to jury trial on the questions of (1) whether the parties entered into an oral agreement to each pay an equal share of attorney's fees incurred in the defense of the creditors' claims against the corporation, and (2) whether plaintiff should be awarded punitive damages.
At the close of plaintiff Beaupre's case, Kingen and Betzold moved for directed verdicts, arguing that the alleged oral agreement violated the statute of frauds and that Beaupre had failed to present evidence sufficient to go to the jury on the question of punitive damages. The district court ruled as a matter of law that the statute of frauds was inapplicable to this case. He denied both motions for directed verdicts. The jury returned a verdict in favor of plaintiff Beaupre and awarded him punitive damages, but in an amount equal only to his attorney's fees incurred in bringing the case. The court entered judgment in accordance with the verdict, and additionally awarded Beaupre his costs. The court also found that Kingen and Betzold had defended the action frivolously and noted that, had the jury not awarded punitive damages to Beaupre in an amount sufficient to cover his attorney's fees, he, the trial court, would have awarded Beaupre attorney's fees.
As above noted, the only issues raised by Kingen and Betzold on this appeal are the judgment in favor of Beaupre for attorney's fees expended in defending the creditors' claims against the corporation, and the award of punitive damages. Beaupre has cross-appealed, alleging insufficiency of the punitive damages.
Kingen and Betzold contend here that the evidence was insufficient to support a jury finding that an oral contract existed which obligated them to each pay one-third of the attorney's fees incurred for the purpose of defending the creditors' lawsuits against the corporation. Upon appeal, the questions of the existence of and interpretation of a contract are within the discretion of the fact-finder, and a jury decision will not be overturned where supported by the evidence. Gardner v. School Dist. No. 55, 108 Idaho 434, 700 P.2d 56 (1985); Werry v. Phillips Petroleum Co., 97 Idaho 130, 540 P.2d 792 (1975). We hold that sufficient evidence exists in the record to warrant submission of the oral contract issue to the jury.
Beaupre testified that he had discussed payment of the attorney's fees with Betzold and Kingen several times, and that each of the shareholders verbally agreed to personally cover one-third of the fees incurred, because "[c]learly ... we had to protect ourselves in the lawsuit ... that was the only way out." Similar testimony was received from two of the attorneys who participated in the defense of those lawsuits, to the effect that all three parties actively participated in or were kept advised of case strategy, settlement negotiations, and other legal matters. Each of the three parties had executed personal guarantees covering the corporate debts, which were the subject of the lawsuits, and hence the personal finances of all three parties were at stake. We hold that the jury verdict was based on substantial and competent evidence.
Kingen and Betzold next argue that the trial court erred in finding that the alleged oral agreement to pay attorney's fees did not fall within the statute of frauds, specifically I.C. § 9-505(2), which provides in pertinent part:
Exceptions to the requirements of I.C. § 9-505(2) are contained in I.C. § 9-506, which provides in pertinent part, as follows:
9-506. Original obligations.--Writing not needed.--A promise to answer for the obligation of another, in any of the following cases, is deemed an original obligation of the promisor, and need not be in writing:
The trial court held that sufficient evidence had been presented to support a finding that the oral agreement in question was an original one under the provisions of I.C. § 9-506, rather than a collateral agreement within the terms of I.C. § 9-505(2), and that therefore the statute of frauds did not bar plaintiff Beaupre's claims for reimbursement of moneys expended for attorney's fees. We agree.
The jury found that the parties had mutually agreed to pay the attorney's fees incurred in untangling the legal problems facing Colo-Robin Corporation. Such agreement was made separately and remotely, both as to intent and as to time, from the earlier written promises to guarantee the obligations of the corporation, i.e., bank loans, lease contracts, and tax liabilities. Furthermore, although the subject of the creditors' lawsuits was in one sense the collection of a debt against the corporation, because of the personal written guarantees of each of the parties, it was equally an action against each of them. Although the defense of the action might conceivably benefit the corporation,...
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