Chung v. Kaonohi Center Co.

• Decision Date: 08 October 1980
• Docket Number: No. 6190,6190
• Citation: 62 Haw. 594,618 P.2d 283
• Parties: Farrant CHUNG and Jordan Y. S. Lum, J & C Company, a Hawaiian Partnership, Farrant Chung and Jordan Y. S. Lum, Individual and General Partners, Plaintiffs-Appellees, v. KAONOHI CENTER COMPANY, a Hawaiian General Partnership, Sheldon M. Gordon and E. Phillip Lyon, Individual General Partners, and Pearlridge Mall-joint venture 315068, Ed Brennan, Sheldon M. Gordon, E. Phillip Lyon, John Fujieki, and Northwestern Mutual Life Insurance Company, a Wisconsin Corporation, Partners and Joint Venturers, Defendants-Appellants, and Hawaii Shopping Center Corporation, a Hawaiian Corporation, William E. Prosser, Defendants.
• Court: Hawaii Supreme Court

Page 283

618 P.2d 283

62 Haw. 594

Farrant CHUNG and Jordan Y. S. Lum, J & C Company, a Hawaiian Partnership, Farrant Chung and Jordan Y S. Lum, Individual and General Partners Plaintiffs-Appellees, v. KAONOHI CENTER COMPANY, a Hawaiian General Partnership Sheldon M. Gordon and E. Phillip Lyon, Individual General Partners, and Pearlridge Mall-joint venture 315068, Ed Brennan, Sheldon M. Gordon, E. Phillip Lyon, John Fujieki and Northwestern Mutual Life Insurance Company, a Wisconsin Corporation, Partners and Joint Venturers, Defendants-Appellants, and Hawaii Shopping Center Corporation, a Hawaiian Corporation, William E. Prosser, Defendants.

No. 6190.

Supreme Court of Hawai'i.

Oct. 8, 1980.

Syllabus by the Court

1. When a court has admonished a jury to disregard improper testimony, the ordinary presumption is that the jury will do so. However, when the improper testimony is prejudicial to the opposing party, the ordinary presumption prevails only if there is a reasonable certainty that the impression upon the jury could be or was dispelled by the court's admonition.

2. Where a witness made one isolated prejudicial statement and such statement was immediately stricken and the jury instructed to disregard it, there is more than a reasonable certainty that the trial court's admonition to the jury dispelled any prejudicial effect.

3. The dispositive factor in allowing damages for emotional distress and disappointment for breach of contract is not the nature of the contract but, rather, the wanton or reckless nature of the breach. Thus, in an appropriate situation, damages for emotional distress and disappointment may be recovered when the relationship between the parties is based on a commercial contract.

4. Defendants' breach of a contract to lease a Chinese fast-food kitchen to plaintiffs amounted to wanton and/or reckless conduct sufficient to give rise to tort liability where defendants, without informing plaintiffs, also negotiated with other parties for lease of the kitchen, made numerous representations to plaintiffs that they had secured the lease, allowed plaintiffs to expend funds in reliance thereof, and denied a newspaper report which stated that the kitchen had been leased to another party.

5. Where defendants objected to plaintiffs' proposed instruction on one ground but failed to object on another ground and subsequently failed even to raise that objection in their appellate briefs, the issue was not properly raised on appeal.

6. This court will take cognizance of a trial court's error in giving a jury instruction even if there is a failure to properly object and a failure to properly raise the error on appeal if the error is plain and will result in a miscarriage of justice.

7. Where a plaintiff can show future profits in a new or unestablished business with reasonable certainty, damages for loss of such profits may be awarded.

8. The evidence necessary to show future profits in a new or unestablished business with reasonable certainty depends on the circumstances of each individual case. While absolute certainty is not required, the court or jury must be guided by some rational standard in making such an award.

9. In determining lost profits of an unestablished business, it was not error for an expert witness to use a gross income figure based on the gross income of an existing Chinese fast-food operation which was in the identical location and served the same type of food to the same type of clientele as plaintiffs' proposed restaurant, especially where the expert had conducted a one-day survey of gross receipts of the existing operation and had also considered the gross income of other Chinese restaurants.

10. A witness having the necessary qualifications may give an opinion as to the value of property and the factors considered and the extent of knowledge and reasoning of an otherwise qualified appraiser are matters which go to the weight rather than the competence of his testimony.

11. In order to arrive at a net income figure in determining lost profits in an unestablished business, an expert witness may estimate cost of goods and expenses where the estimates are based on the expert's appraisal experience and an examination of other restaurant operations.

12. Once a witness is qualified as an expert appraiser, he or she should be permitted to give an opinion using any of the accepted methods of valuation. Weaknesses in reaching the valuation go to the weight of such testimony. It is incumbent on the opposing party to bring out any such weaknesses on cross-examination or through presentation of counter evidence.

13. Submission to the jury of a special verdict form containing blanks for dollar amounts for lost profits and emotional distress damages was not error where, on appeal, appellants failed to support their contention that form led jury to believe that it was required to fill in the blanks with dollar amounts and where trial court instructed the jury that it could only award damages for reasonably certain harm or loss proximately resulting from the contract breach.

Berton T. Kato, Honolulu (Clyde W. Matsui, Honolulu, on briefs; Kobayashi, Watanabe, Sugita & Kawashima, Honolulu, of counsel), for defendants-appellants.

Edward Y. N. Kim, Honolulu, for plaintiffs-appellees.

Before RICHARDSON, C. J., OGATA and MENOR, JJ., and CHANG, Circuit Judge in place of KOBAYASHI, J., disqualified. ^*

RICHARDSON, Chief Justice.

This case arises out of a contract to lease concession space for a fast-food Chinese kitchen in the Pearlridge Mall. Plaintiffs-appellees, Farrant Chung, Jordon Y. S. Lum, and J & C Company, a partnership consisting of Chung and Lum, brought a successful breach of contract action in the circuit court of the first circuit against defendants-appellants, Kaonohi Center Company, a Hawaii general partnership, Sheldon M. Gordon and E. Phillip Lyon, individual general partners, and Pearlridge Mall-joint venture 315068, Ed Brennan, Sheldon M. Gordon, E. Phillip Lyon, John Fujieki, and Northwestern Mutual Life Insurance Company, a Wisconsin corporation, partners and joint venturers. ¹ We affirm.

In September, 1971, plaintiffs negotiated with William Prosser, defendants' agent, for a ten-year lease on a Chinese fast-food outlet as one component of an international kitchen to be constructed by defendants at the Pearlridge Mall. At that time, plaintiff Chung was a stockbroker and plaintiff Lum owned and operated the House of Dragon, a Chinese restaurant in the Pearl City Shopping Center. ²

As a result of the negotiations, a contract to lease the Chinese kitchen was executed on January 17, 1972. On January 20, 1972, plaintiffs paid defendants a $1,666 deposit on the lease. ³ In anticipation of operating the Chinese kitchen, plaintiffs arranged for financing, ordered equipment and furnishings, hired chefs and workers, advertised in the yellow pages of the telephone book for the to-be-built kitchen, and incurred other expenses.

Plaintiffs were in frequent contact with defendants after the lease was signed and the record shows voluminous correspondence between the parties concerning the design and operation of the fast-food Chinese kitchen. Whenever plaintiffs inquired about an opening date, they were told to be patient and were assured that they would be notified as soon as a firm date was set. During this period, defendants were negotiating with other parties about leasing the Chinese kitchen. Defendants had given a right of first refusal to a Ms. Liza Chong and were also negotiating with a Mr. Sergio Battistetti, whose partnership eventually obtained the lease on the entire international kitchen operation. Plaintiffs were never informed of these other negotiations. In fact, when confronted with a newspaper article naming Battistetti as the lessee of the international kitchen, Prosser denied the report.

In early June 1973, Prosser sent a letter to plaintiffs informing them that the landlords of Pearlridge Shopping Center had decided not to pursue plaintiffs' lease of the Chinese kitchen. A check for $1,666, the amount of plaintiffs' deposit, was enclosed.

In the trial court, plaintiffs sought specific performance of the lease agreement, contract damages including damages for emotional distress and loss of future profits, and punitive damages for fraudulent, malicious and intentional misrepresentation and acts. The trial judge denied plaintiffs' request for an instruction on punitive damages, ⁴ but allowed instructions on damages for emotional distress and lost profits. The jury returned a special verdict awarding $50,000 for emotional distress and $175,000 for lost profits. Defendants then moved for judgment notwithstanding the verdict or, in the alternative, for a new trial. The motion was denied and this appeal followed.

On appeal, appellants do not challenge the jury's finding with respect to liability. With one exception, this appeal is premised entirely upon the jury's award of $225,000 in contract damages. The issues which appellants raise and the order in which they will be discussed are:

I. Whether the trial court erred in denying defendants' motion for a mistrial, which was based upon testimony by plaintiff Lum that his wife had suffered miscarriages as a result of the contract breach.

II. Whether the trial court erred in giving a jury instruction allowing damages for emotional distress for breach of a commercial contract.

III. Whether the trial court erred in giving a jury instruction allowing damages for loss of anticipated profits in an unestablished business.

IV. Whether the trial court erred in submitting to the jury a special verdict form, which contained spaces for damages for emotional distress and lost profits.

I. Motion for Mistrial.

We first consider appellants' contention that a mistrial should have been declared because of certain testimony by plaintiff Lum. The testimony was as follows:

Q (By Mr. Kim, plaintiffs' attorney):...