Brown v. McIbs, Inc., 51006

• Decision Date: 30 December 1986
• Docket Number: No. 51006,51006
• Citation: 722 S.W.2d 337
• Parties: Sam BROWN, Plaintiff-Respondent, v. McIBS, INC., Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 337

722 S.W.2d 337

Sam BROWN, Plaintiff-Respondent, v. McIBS, INC., Defendant-Appellant.

No. 51006.

Missouri Court of Appeals,

Eastern District,

Division Four.

Dec. 30, 1986.

The Stolar Partnership, S. Francis Baldwin, St. Louis, for defendant-appellant.

Gordon F. Webb, St. Louis, for plaintiff-respondent.

SIMON, Judge.

This appeal arises out of an action by plaintiff, Sam Brown, for the breach of an employment agreement by defendant, McIBS, Inc. Trial was by jury in the Circuit Court of the County of St. Louis, and a verdict was returned in favor of plaintiff in the amount of $150,000 and against defendant on its counterclaim. Judgment was entered on the verdict.

On appeal McIBS raises five points of error. McIBS claims that the trial court erred in overruling its motion for new trial because: (1) the verdict is not supported by substantial evidence; (2) the trial court abused its discretion in ordering McIBS to deposit $1,000.00 into the registry of the court, to pay for opposing counsel's travel expenses, as a condition to deposing six witnesses in the State of Colorado; (3) the plaintiff intentionally prejudiced the jury by asking a McIBS witness on cross-examination whether he had ever been arrested; (4) the trial court improperly instructed the jury on McIBS' affirmative defense; and (5) the trial court wrongly denied McIBS' motion for default judgment on its counterclaim. We reverse and remand.

Because the sufficiency of the evidence is in dispute, it is necessary to relate the evidence in some detail to adequately consider defendant's points. We set forth the facts and reasonable inferences therefrom in the light most favorable to the verdict. Wright v. Osborn, 356 Mo. 382, 201 S.W.2d 935, 937 (1947).

McIBS, Inc., a Delaware corporation, was organized to market a patented concrete block used in construction. The blocks are revolutionary in that mortar is not required to fuse the blocks together. The McIBS blocks are fastened by means of an interlocking tongue and groove system. The McIBS system was designed to save time in construction in that, apparently, a greater number of McIBS blocks can be laid per unit of time than conventional blocks. McIBS does not actually produce concrete blocks itself. Instead it grants to existing block manufacturers the right to produce blocks in conformity with McIBS' patents. In return, McIBS receives a royalty on each block produced by the manufacturer.

Plaintiff founded McIBS and invented the design for the patented interlocking blocks. It appears from the record that he once served as chief operating officer and chairman of the board. How he came to be employed as the corporation's director of sales is unclear. However, it is certain and the parties do not dispute that plaintiff had a valid employment contract with McIBS to serve as director of its sales department. The contract was entered into September 1, 1980. The contract provided that the term of plaintiff's employment would be from that date through August 31, 1985. The contract was subject to automatic renewal for successive one year terms unless McIBS or plaintiff elected otherwise on 30 days written notice.

Under the terms of the contract plaintiff was to "diligently and faithfully perform all of his duties to the best of his abilities in a professional manner." In return, plaintiff was to be paid an annual salary of $48,000, plus "an amount equal to 5% of the excess of net income of [McIBS] and its consolidated subsidiaries, before taxes, for such fiscal year ... over $100,000." Plaintiff's employment was subject to termination under the contract "at any time if, in the reasonable judgment of the Board of Directors, ..., there has been a material violation by [plaintiff] of his duties or obligations hereunder which makes such termination appropriate."

Plaintiff testified that his "job was to take a brand new product and go out and put it on the market, and convince people that they could use a block without mortar." Plaintiff testified further that his job was hard and tough and that he had "to be very hard and tough in making a sale."

McIBS maintains that it terminated plaintiff because of the way he performed his duties under his "hard and tough" sales philosophy. McIBS' witnesses testified that plaintiff told potential customers that they were running their businesses improperly; that he was argumentative; that he made outlandish claims about McIBS' blocks; that he was pushy, abrasive, and unpleasant; that he was rude and crude; that because of plaintiff some customers did not want to do business with McIBS.

On March 2, 1983, Earnest Winders, Chief Executive Officer of McIBS, personally delivered a letter of termination. The letter read Dear Sam [Plaintiff]: It is with the deepest and sincerest remorse that I have to write this letter. I have searched for many different ways and answers to handle this problem, but none of them have worked. In order for McIBS to move forward in a more harmonious fashion than it has this past year, your services are no longer required at this office, effective March 8, 1983.

Thereafter, on March 8, 1983, McIBS' board of directors met and unanimously approved and ratified the letter written by Winders. The minutes of the meeting reflect the following:

Ernest Winders presented his reasons for the termination letter written to Sam Brown. By resolution of the Board the letter written by Ernest Winders, dated March 2, 1983, is hereby approved. Sam Brown will function in the future as consultant to the company at the discretion of Mr. Ernest Winders, Chief Executive Officer. No judgment has been made at this time as to whether Mr. Brown has fulfilled or not fulfilled the terms and provisions of the employment agreement. Accordingly, all communications by Mr. Brown regarding company matters are to be directed to the Chief Executive Officer or persons designated by him.

McIBS continued to pay plaintiff through July, 1983, even though McIBS claimed to have terminated him in March. On or about September 13, 1984, the Board met again and reaffirmed plaintiff's alleged termination as of March 8.

On November 14, 1983, plaintiff filed suit against McIBS for breach of the employment agreement. Plaintiff alleged that McIBS "failed to make payments to plaintiff when due, pursuant to the terms of said [a]greement." As a result of the breach, plaintiff claimed damages in the sum of $150,000. McIBS filed its answer on February 6, 1984. McIBS admitted that it had entered the employment agreement but denied having breached it and counterclaimed alleging that it was plaintiff who breached the agreement by failing to observe his duty of good faith under the contract. McIBS claimed actual damages in the amount of $500,000.

With respect to plaintiff's damages, the evidence showed that in 1980, plaintiff was paid $16,000 (all that was due since his employment commenced September 1); in 1981, he was paid $46,000; in 1982, he was paid $42,000; and in 1983, he was paid $26,000. He received no salary in 1984 or 1985. During the time plaintiff was with McIBS, the corporation never generated a profit. And, while there was some evidence regarding McIBS' sales for the years 1982-1985, there was no evidence showing the net income of the corporation, before taxes, for any year.

In its first point, McIBS contends that the trial court erred in denying its motion for new trial because the verdict was not supported by substantial evidence. We agree.

McIBS argues that the maximum amount that the jury could have awarded plaintiff was $110,000--comprised of the following sums: $2,000 due and owing for 1981, plus $6,000 due and owing for 1982, plus $22,000 for 1983, plus $48,000 for 1984, plus $32,000 for January 1 through August 31, 1985 (the day the contract expired).

Plaintiff maintains that there was sufficient evidence to support the jury's verdict. Plaintiff argues that McIBS' calculation fails to take into account that plaintiff was entitled under the contract to 5% of the net profits, before taxes, over $100,000. Plaintiff admits that McIBS did not make a profit, but argues that this was because he was fired. Plaintiff points to the fact that McIBS did more business during the five months in 1983 that he was there than the entire year of 1984 and to the fact that McIBS had projected sales of $3,000,000 for 1985 as evidentiary support for the jury's award.

It is clear that plaintiff had no more than a prospective interest in profits that might have been generated by McIBS if he had been retained. The rule is well settled in this state that damages for the loss of anticipated profits resulting from actionable conduct of another "are recoverable only when they are made reasonably certain by proof of actual facts which present data for a rational estimate of such profits." Yaffe v. American Fixture Co., 345 S.W.2d 195, 199 (Mo.1961). Because a multitude of variable factors can enter into the composition of such damages, our courts have been strict in their evaluation of the sufficiency of the evidence warranting a recovery for loss of profits. Spruce Co. v. Mays, 333 Mo. 582, 62 S.W.2d 824, 828 (1933). In Tnemec Company, Inc. v. North Kansas City Development Co., 290 S.W.2d 169, 174 (Mo.1956), our Supreme Court stressed that the evidence of lost profits must be sufficiently definite and certain so as to allow a reasonably accurate estimate of the loss without resorting to speculation.

The general rule as to recovery of anticipated profits of a commercial business is that they are too uncertain and dependent upon changing circumstances to warrant a judgment for their recovery. Anderson v. Abernathy, 339 S.W.2d 817, 824 (Mo.1960). In the case of an established business, however, anticipated profits may be recovered where the plaintiff makes it reasonably certain by competent proof what they would have been. Id. It is indispensable that this proof include the income and expenses...