Charles R. Combs Trucking, Inc. v. International Harvester Co.

• Decision Date: 01 August 1984
• Docket Number: No. 83-315,83-315
• Citation: 12 OBR 322,466 N.E.2d 883,12 Ohio St.3d 241
• Court: Ohio Supreme Court
• Parties: , 12 O.B.R. 322 CHARLES R. COMBS TRUCKING, INC., Appellant, v. INTERNATIONAL HARVESTER COMPANY, Appellee.

Page 241

12 Ohio St.3d 241

466 N.E.2d 883, 12 O.B.R. 322

CHARLES R. COMBS TRUCKING, INC., Appellant, v. INTERNATIONAL HARVESTER COMPANY, Appellee.

No. 83-315.

Supreme Court of Ohio.

Aug. 1, 1984.

Syllabus by the Court

1. App.R. 12(D) and Civ.R. 42(B) together authorize a court of appeals to order a retrial of only those issues which resulted in prejudicial error.

2. Lost profits may be recovered by the plaintiff in a breach of contract action if: (1) profits were within the contemplation of the parties at the time the contract was made, (2) the loss of profits is the probable result of the breach of contract, and (3) the profits are not remote and speculative and may be shown with reasonable certainty.

3. In each case of alleged fraud the plaintiff, in order to be awarded punitive damages, must establish not only the elements of the tort itself but, in addition, must either show that the fraud is aggravated by the existence of malice or ill will, or must demonstrate that the wrongdoing is particularly gross or egregious.

Plaintiff-appellant, Charles R. Combs Trucking, Inc. ("Combs"), is a corporation in the business of transporting sand and gravel from Watson Gravel, Inc. to various construction sites. Charles R. Combs is a truck driver and operates his close corporation as a sole proprietor. Since 1973, Combs' chief source of income has been the tonnage fees earned in transporting the sand and gravel.

Ronald Watson is the owner of the Watson mining site. In 1977, he employed eight to ten independent truckers to transport sand and gravel on a permanent basis. Watson assigned customer orders to the drivers on the basis of each trucker's seniority in dealing with him. The orders were rotated down the list until each trucker received one, and then down the list again until the day's orders were exhausted. By agreement, this relationship between Watson and the truckers was terminable upon ten days' notice given by either party.

Combs operated two trucks from the Watson site. These two trucks held the third and fourth positions of seniority, immediately behind two trucks operated by Watson. To maximize profits, Combs decided to purchase three new trucks with greater load capacities. Towards this end, Combs entered into an agreement with Watson and another independent trucker. The latter agreed to purchase Combs' two trucks and operate them out of Combs' seniority positions until April 1, 1978. At that time Combs agreed to return with two of his three new trucks and resume his former operations. Watson agreed to allow Combs to operate his third new truck from another Watson gravel pit.

In November 1977, Combs visited King Sales & Service, Inc. ("King Sales"), a co-defendant, to purchase the three new trucks. Pursuant to a franchise agreement, King Sales was the exclusive dealer for the International Harvester Co., defendant-appellee, in that locale. Combs met with Marion King, the owner of King Sales; Francis Parrish, a salesman; and Thomas Winkler, the district sales manager for defendant. Combs wanted to purchase defendant's "Transtar" model, but it was not suited for the off-the-road hauling involved in gravel pit operations. However, King and Winkler assured Combs the "Transtar" could be modified for rough terrain hauling, primarily by substituting construction strength framing.

Combs insisted upon a March 1, 1978 delivery date for the trucks for three reasons: he had to resume his operations at the gravel pit by April 1, 1978 or forfeit his seniority positions; he had drivers committed to operating the trucks; and he wanted the benefit of an investment tax credit before the end of his corporate year. King and Winkler assured Combs the trucks would be produced by the March date. In fact, Winkler indicated the trucks would probably be produced in January 1978. As a result, Combs agreed to purchase the three trucks. Combs obtained financing for $188,000 from defendant and gave King Sales a $6,000 down payment.

Chick Little, general manager of King Sales, sent the completed order forms to defendant on November 28, 1977. Little specified a production request date of January 1978. Defendant returned copies of the orders indicating the trucks would be produced in March 1978.

In February, Little contacted various of defendant's employees to confirm the delivery date. He was informed there would be production delays occasioned by engineering problems and parts shortages. The record indicates that defendant's marketing relations manager made misrepresentations of an expected delivery date, knowing the trucks would not be produced for another three months.

At the end of March, defendant issued manufacturer's statements of origin for two of the trucks even though the trucks did not then exist. Plaintiff thereafter received title to these trucks. Throughout April, May, June, and July, defendant assured Little and Combs the trucks would be manufactured within three to ten days. In reliance upon these representations, Combs did not purchase new trucks from any other dealer. Defendant produced and delivered the trucks in August, but the trucks were not suitable for use as delivered. Watson informed Combs in September that he had forfeited his seniority positions at the gravel pit. The trucks were not suitable for use until January 1979. Combs has not resumed operations nor earned any income.

Plaintiff sued defendant for fraud and breach of contract, including a third-party beneficiary claim, in the Court of Common Pleas of Butler County. A jury returned a verdict in favor of plaintiff, and against defendant, in the amount of $900,000 in compensatory damages and $3,500,000 in punitive damages. The jury also found for co-defendant King Sales, a judgment which the plaintiff has not appealed. The trial court overruled defendant's motions for a directed verdict and judgment notwithstanding the verdict. Thereafter, defendant appealed to the court of appeals.

The appellate court held there was competent credible evidence to support a finding of fraud and that defendant had breached a contract with co-defendant King Sales to supply the trucks for which plaintiff was a third-party beneficiary. However, the court held the evidence presented on compensatory damages was inadequate to support the jury's verdict. Further, the court held the award of punitive damages and of attorney's fees as compensatory damages were improper as the plaintiff had not demonstrated the defendant's actions were particularly gross or egregious. Thus, while agreeing defendant's liability was established at trial, the court ordered a complete new trial because of the insufficiency of plaintiff's proof of damages. The court overruled several of defendant's other claimed errors on appeal finding the defendant had failed to object to a jury instruction relating to plaintiff's mitigation of damages, to one of plaintiff's witnesses testifying to an ultimate issue, and to plaintiff's counsel's closing argument.

The cause is now before this court pursuant to the allowance of plaintiff's motion to certify the record. Defendant has not taken a cross-appeal on the issues relating to its liability.

Wochna, Fallon & Iler, Don C. Iler, Cleveland, Holbrock, Jonson, Bressler & Houser, Hugh D. Holbrock, George N. Jonson and Timothy R. Evans, Hamilton, for appellant.

Vorys, Sater, Seymour & Pease, John C. Elam, Thomas B. Ridgley, Gerald P. Ferguson, Columbus, Edward J. Utz, Cincinnati, and Semour W. Chicago, Ill., Croft, for appellee.

COX, Justice.

The pivotal issue is whether the court of appeals erred when it ordered a complete new trial when the only reversible error dealt exclusively with the award of damages.

The appellate court affirmed the jury verdict with respect to the issue of liability on the plaintiff's claim for fraud and breach of contract.

App.R. 12(D) and Civ.R. 42(B) together authorize the court of appeals to order a retrial of only those issues which resulted in prejudicial error. Inasmuch as the issue of liability has been established, the sole issue to be determined on retrial would be the amount of damages. The plaintiff-appellant herein need not retry its case as to liability of the defendant-appellee. That has been established. Prior testimony on the issue of fraudulent conduct is admissible on a retrial of the issue of damages and is proper in order to allow jury determination of both compensatory and punitive damages.

Upon consideration of the record, the court of appeals found insufficient evidence to support a finding of $900,000 in compensatory damages. We agree.

The general rule is that lost profits may be recovered by the plaintiff in a breach of contract action if: profits were within the contemplation of the parties at the time the contract was made, the loss of profits is the probable result of the breach of contract, and the profits are not remote and speculative and may be shown with reasonable certainty. 30 Ohio Jurisprudence 3d (1983) 100, Damages, Section 90.

Application of that maxim to the framework of this case shows:

(1) that profits were contemplated by the parties at the time of the contract; and

(2) loss of profits was the result of the breach of contract.

However, an award of lost profits for the remaining contemplated working years of Combs is not warranted. While age is relevant in contemplating damages in a wrongful death action, such consideration leads to speculation and not reasonable certainty in a breach of contract action.

The plaintiff's evidence of lost future profits as an item of compensatory damages need only be reasonable, not specific. Under the facts of the instant case, the fact that the contract between plaintiff and the gravel pit operator was terminable at will by ten days' advance...