Davis v. Gage
Decision Date | 16 May 1984 |
Docket Number | No. 14356,14356 |
Citation | 106 Idaho 735,682 P.2d 1282 |
Parties | David E. DAVIS and Sandra J. Davis, husband and wife, Plaintiffs-Respondents, v. Edward J. GAGE and Betty Gage, husband and wife, Defendants-Appellants. |
Court | Idaho Court of Appeals |
Everett D. Hofmeister, Coeur d'Alene, for defendants-appellants.
Thomas A. Mitchell, Coeur d'Alene, for plaintiffs-respondents.
This is an appeal from an award of damages in a suit brought by respondents Davises against appellants Gages for breach of a contract relating to the sale of commercial property and for intentional infliction of emotional distress. The district court awarded the Davises nominal damages plus punitive damages for breach of a contractual noncompetition clause and for mental anguish. The district court also awarded the Davises damages for the Gages' wrongful severance of a sewer connection to a drainfield. The Gages appealed. We affirm in part, reverse in part and remand for reconsideration of the amount of punitive damages awarded.
The issues on appeal are whether the award of punitive damages was proper under the circumstances of this case and whether the awards of damages for mental anguish and for the wrongful severance of the sewer connection are supported by the evidence.
In November 1973 the Gages sold the Davises real property located adjacent to Highway 95 near Sandpoint, Idaho. The contract covered a restaurant-tavern and contained a covenant that the Gages would not "in any way" compete with the Davises' business for a period of fifteen years. A series of confrontations between the parties began in the summer of 1974. First, the Gages brought an action to foreclose a deed of trust on the Davises' property. They claimed the Davises had failed to sufficiently insure the premises. The action was later dropped. The Gages then tore down a billboard and appropriated the materials for their own use. This billboard was not on property purchased by the Davises. However, the district court found that it was part of the personal property of the business sold by the Gages to the Davises. It had been used to advertise the restaurant-tavern when the Gages owned it. The Gages also disconnected a drainfield for two septic tanks used by the restaurant-tavern. The drainfield and one of the tanks were located on the Gages' property adjacent to the premises sold to the Davises. Finally, the Gages built, equipped and leased a restaurant 200 feet from the Davises' restaurant, in violation of the covenant not to compete.
The Davises filed their suit and the Gages counterclaimed. Both parties sought punitive damages. Trial before the court was held in April 1979. The district court found that the Gages had violated the covenant not to compete and awarded nominal damages, as well as punitive damages, for that breach. 1 The court also awarded damages for mental anguish caused by the Gages' conduct leading up to the suit. Finally, damages for the wrongful severance of the sewer connection were awarded.
The Gages challenge the award of punitive damages on two grounds. First, they argue that an award of punitive damages was not proper under the circumstances of this case. Second, the Gages contend that even if punitive damages were properly awarded, they were excessive.
An award of punitive damages is first within the province of the trier of fact, subject to review for abuse of discretion. Cheney v. Palos Verdes Investment Corp., 104 Idaho 897, 665 P.2d 661 (1983). That discretion is to be exercised within the "general advisory guidelines" laid down in the past, see id. at 905, 665 P.2d at 669, but an award will be sustained only when it is shown that the act was "an extreme deviation from reasonable standards of conduct, and that the act was performed by the defendant with an understanding of or a disregard for its likely consequences (in the words of prior cases, with fraud, malice or oppression)." Linscott v. Rainier National Life Ins. Co., 100 Idaho 854, 858, 606 P.2d 958, 962 (1980).
We must now determine whether the district court abused its discretion in this case. It has long been held that punitive damages are not favored in Idaho and should be awarded only within narrow limits. Gavica v. Hanson, 101 Idaho 58, 608 P.2d 861 (1980). Our Supreme Court recently reiterated "that the policy behind punitive damages is deterrence rather than punishment." Cheney v. Palos Verdes Investment Corp., 104 Idaho at 905, 665 P.2d at 669. The court thus continues to follow the policy stated in Yacht Club Sales and Service, Inc. v. First National Bank of North Idaho, 101 Idaho 852, 623 P.2d 464 (1980), where it said:
Id. at 864, 623 P.2d at 476 (quoting Jolley v. Puregro, 94 Idaho 702, 708-09, 496 P.2d 939, 945-46 (1972)). Therefore, the district court should rarely, if ever, award punitive damages absent a likelihood of future bad conduct. Linscott v. Rainier National Life Ins. Co., supra. The likelihood of future bad conduct is a question of fact. Where there is substantial and competent--even though conflicting--evidence of extreme bad conduct and of a need for deterrence of similar future conduct, we will uphold an award of punitive damages. Cheney v. Palos Verdes Investment Corp., 104 Idaho at 905, 665 P.2d at 669.
The conduct complained of here is a breach of a covenant not to compete. The Gages violated the covenant by moving a building to their property and leasing it to a third party for a period of five years. The lease contained the clause: "Lessee shall use said premises and equipment for restaurant and dining purposes only." The district court held that the punitive damages were awarded "for the purpose of punishment and deterring similar conduct." The district court awarded only nominal damages for the breach, finding that the actual damages the Davises sought to prove were too speculative.
The Gages contend that nominal damages cannot serve as a basis for punitive damages. However, in Village of Peck v. Denison, 92 Idaho 747, 450 P.2d 310 (1969), the Idaho Supreme Court held "[t]he absence of a showing of actual damages need not bar an award of punitive damages, for such a showing is not a talismanic necessity." Id. at 751, 450 P.2d at 314. The foundational requirement is that some legally protected interest be invaded. Village of Peck held that an award of equitable relief fulfilled this requirement. We note that it is notoriously difficult to prove actual damages flowing from a breach of a covenant not to compete. See, e.g., Vancil v. Anderson, 71 Idaho 95, 227 P.2d 74 (1951); Dunn v. Ward, 105 Idaho 354, 670 P.2d 59 (Ct.App.1983). There is no reason why nominal damages, which also require a showing that a legally protected interest has been invaded, cannot fulfill the requirement. See Aztec Limited, Inc. v. Creekside Inv. Co., 100 Idaho 566, 602 P.2d 64 (1979).
Finally, the Gages argue that punitive damages may not be awarded in a breach of contract case. This is plainly not the law. "[N]umerous situations arise where the breaking of a promise may be an extreme deviation from standards of reasonable conduct, and, when done with knowledge of its likely effects, may be grounds for an award of punitive damages." Linscott v. Rainier National Life Ins. Co., 100 Idaho at 860, 606 P.2d at 964.
To justify an award of punitive damages, the conduct of the wrongdoer must also be wanton, malicious or gross and outrageous, or imply malice or oppression. Unfried v. Libert, 20 Idaho 708, 119 P. 885 (1911). This means there must be an "intersection" of a bad act (an extreme deviation from reasonable standards of conduct) and a bad state of mind (e.g., malice). Linscott v. Rainier National Life Ins. Co., 100 Idaho at 858, 606 P.2d at 962. The district court stated that it could "imagine no clearer case of a violation of the intent expressed by the noncompetition clause in the original agreement." Nor can we. The covenant not to compete was clear and unambiguous. The Gages' conduct was, according to the district court, "willful, wanton, malicious and the proper subject for punitive damages."
While this statement reflected the view of the district court of the Gages' conduct in breaching the agreement not to compete, that conduct does not have to be viewed without regard to the Gages' other conduct throughout this controversy. The judge could properly consider the other acts done and statements made by the Gages which indicated malice or a purpose to defeat the Davises' efforts to perform their contract or to successfully operate the business they were purchasing. This other conduct of the Gages could also be considered in determining whether there was a need to deter the Gages from similar conduct in the future. The imposition of nominal damages is unlikely to have any deterrent effect. However, an assessment of punitive damages takes away the incentive for engaging in bad conduct by making such conduct unprofitable. See Boise Dodge, Inc. v. Clark, 92 Idaho 902, 453 P.2d 551 (1969). The district court's decision to award punitive damages is supported by substantial evidence and will not be disturbed on appeal. I.R.C.P. 52(a).
Punitive damages having been properly awarded, the only question remaining is whether the award was excessive. Boise Dodge, supra. The Gages argue that punitive damages should be limited to reasonable attorney fees, related expenses and reimbursement for time and effort required to bring the action. For this proposition, they rely...
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