Fontainbleau Hotel Corp. v. Crossman

• Decision Date: 11 October 1963
• Docket Number: No. 20083.,20083.
• Parties: FONTAINBLEAU HOTEL CORP. and Babs, Inc., Appellants, v. Florence Lustig CROSSMAN, Appellee. Florence Lustig CROSSMAN, Appellee, v. FONTAINBLEAU HOTEL CORP. and Babs, Inc., Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

323 F.2d 937 (1963)

FONTAINBLEAU HOTEL CORP. and Babs, Inc., Appellants, v. Florence Lustig CROSSMAN, Appellee.

Florence Lustig CROSSMAN, Appellee, v. FONTAINBLEAU HOTEL CORP. and Babs, Inc., Appellants.

No. 20083.

United States Court of Appeals Fifth Circuit.

October 11, 1963.

Richard P. Kenney, Williams, Salomon, Kenney & Lindzon, Miami, Fla., for Fontainbleau Hotel Corp. Cromwell A. Anderson, Miami, Fla., for Babs, Inc. Smathers & Thompson, Miami, Fla., of counsel.

Robert C. Ward, Ward & Ward, Miami, Fla., for Florence Lustig Crossman.

Before CAMERON and WISDOM, Circuit Judges, and DeVANE, District Judge.

WISDOM, Circuit Judge.

This action by the owner of a dress shop for enforcement of an agreement, allegedly giving the plaintiff an "exclusive" ("exclusive" rights to sell certain articles) of ladies' wearing apparel in the Fontainbleau Hotel in Miami Beach, Florida, is the third round of litigation between Florence Lustig Crossman and Fontainbleau Hotel Corporation. Babs, Inc., another tenant in the Hotel, a co-defendant in the case, was not a party to the earlier litigation.

During the construction of the Fontainbleau in early 1955, negotiations between the Hotel's representatives and Mrs. Crossman resulted in her opening a dress shop in the lower lobby. A lease was drawn giving Mrs. Crossman a five-year leasehold with an option to renew for an additional five years. It provided that

"the lessee will exclusively have and use the premises only for the conduct therein and therefrom of a store for the retail sale of evening gowns, cocktail dresses, women\'s streetwear, women\'s suits and coats, women\'s sports and cruise wear and fur trimmed sweaters, blouses and skirts with matching tops."

The lease was never signed by any agent of the hotel corporation and hence would have been unenforceable under the Florida Statute of Frauds, but for the doctrine of part performance. This Court held that the lease would be binding under that doctrine if it could be shown that the lessee had taken possession, paid rent, and made substantial expenditures for improvements, Crossman v. Fontainebleau Hotel Corp., 5 Cir., 1959, 273 F.2d 720. On remand, the district court found that the plaintiff met this burden. We affirmed. Fontainebleau Hotel Corp. v. Crossman, 5 Cir., 1961, 286 F.2d 926. Florence Lustig Crossman, a/k/a Florence Lustig, trading and doing business as Florence Lustig, therefore, had a valid contract of lease and was entitled to exercise the option to renew.

Shortly after Mrs. Crossman's shop, known as "Florence Lustig," began doing business at the Hotel, a dispute arose with another shop, Babs, Inc., which also sold ladies wear in the lower lobby of the Hotel. Babs complained that Lustig was selling sportswear and swimsuits, items which Babs sold; Lustig complained that Babs was invading its "exclusive" field of high-priced women's apparel. At a meeting on May 8, 1955, representatives of Babs, the Hotel, and "Florence Lustig" resolved this dispute. A letter dated May 9, 1955, signed by the Babs' representative and by Mrs. Crossman as "Florence Lustig, Pres. — Florence Lustig of N.Y. Inc.", reduced the agreement to writing. The May 9 letter provided:

"The Babs shop cannot sell

"Any dress which is one-piece, regardless of whether the dress has matching jackets or sweaters.

"Suits, except those made in leather and suede.

"Fur trimmed sweaters.

"Any two or three-piece matching separates if the combined price exceeds $69.95 retail.

"The Babs shop can sell

"Skirts and sweaters at any price providing the sweaters have no matching material as trimming to match the skirts. However, if they so match they cannot be sold for more than $69.95 retail, and this pertains regardless of whether it is two, three or four pieces.

"It is also understood and agreed that the Florence Lustig Shop can sell such items as they are selling as of this date including all the items presently sold by Babs, Inc., but definitely not to conflict with any of our other shops."

Babs and the Hotel executed a written lease which incorporated the terms of the May 9 agreement and which ran until October 31, 1959. After that date Babs continued to occupy the premises at an increased rental in return for the Hotel's consent to allow Babs to sell previously prohibited items.

Lustig brought this suit against the Hotel Corporation and Babs, Inc., for damages and an injunction to protect her exclusive right to sell high-priced ladies wear in the Hotel. After a trial before judge and jury, the trial judge ruled, as a matter of law, that the lease gave Mrs. Crossman an exclusive privilege to sell the listed items. In defining damages, the court held that the Hotel would be liable to Mrs. Crossman for the difference in value of the leasehold interest with and without the "exclusive" provision, if it knowingly permitted another tenant to sell goods in competition with Mrs. Crossman. The trial judge directed a verdict for the Hotel on the issue of violations before November 1, 1959, the date when Babs' first lease expired, on the ground that there was not sufficient evidence to hold the Hotel to account for damages during that period. Also, he ruled that the May 9, 1959, agreement was not binding on Babs after its original lease expired on November 1, 1959, and that the proper measure of damages for any violations before November 1, 1959, of the May 9 agreement would be the loss of profits suffered by Lustig.

The jury returned verdicts of $9,000 against Babs and $18,000 against the Fontainbleau. In answering several interrogatories submitted to it,¹ the jury showed that it believed the Hotel knew or should have known about Babs' violations between March 9, 1956, and October 31, 1959, and that Lustig had suffered $6,000 damages by reason of the Hotel's failure to observe its obligations in that period; these damages were not awarded, because of the directed verdict for the Hotel on that issue. In addition, the court enjoined the Hotel from allowing anyone on its premises other than Lustig to sell those items which the May 9 agreement forbade Babs to sell.

All three parties appealed. Lustig contends the court erred: (1) in directing a verdict on the issue of the Hotel's liability before November 1, 1959, and (2) in restricting the terms of the injunction to require that the Hotel recognize an exclusive right in Lustig to sell only those items mentioned in the May 9 agreement rather than the broader list of items included in the unsigned lease agreement performed by Lustig. Babs contends the court erred: (1) in ruling that Mrs. Crossman, as an individual, could sue on the May 9 agreement executed by Mrs. Crossman as president of her corporation; (2) in holding that the May 9 agreement was a valid contract; (3) in finding that Mrs. Crossman had shown a loss of profits as a result of Babs' alleged breach; and (4) in not setting aside the verdict for lack of evidence showing the extent of the losses suffered. The Hotel contends that the court erred: (1) in allowing Lustig to enforce any exclusive right in the lease against the Hotel, because Lustig's contact with Babs constituted a novation freeing the Hotel from any obligations under the original lease; (2) in finding that Lustig had exclusive rights under the lease; (3) in admitting certain expert testimony; and (4) in the court's questioning of some of Lustig's witnesses on the issue of damages.

I.

A. The first problem is that of the identity of Mrs. Crossman and her corporation, "Florence Lustig of New York, Inc." We have met this issue before. In the second appeal of the former action, when Mrs. Crossman individually brought suit to enforce the lease which in terms referred to the corporation as lessee, we said:

"The testimony and documentary evidence show that the parties were not concerned with the corporate entity or name of the lessee. The Hotel looked to Florence Lustig Crossman, the individual, to operate the dress shop and since March 11, 1955, she has occupied the premises, paid the rent, and followed the terms of the * * * lease. The contracts and correspondence refer to Florence Lustig, Inc., Florence Lustig of New York, Inc., Florence Lustig, and Florence Lustig Crossman. The district court found that the parties treated Mrs. Crossman and "Florence Lustig of New York, Inc.", as "inseparable and interchangeable"; that the hotel did not care under what name or entity she operated the dress shop as long as she operated it." 286 F.2d at 929-930.

Similarly, in this situation, there is no showing that Babs ever relied on the fact that the May 9 agreement was signed by Mrs. Crossman in her corporate posture, nor was there any evidence that Babs even considered it was dealing with a corporation rather than Mrs. Crossman as an individual. The wording of the May 9 agreement itself shows that the parties considered Mrs. Crossman, the Florence Lustig shop, and the corporation to be legally indistinguishable. Although the agreement was signed as Florence Lustig, president of the corporation, the body of the agreement states first that Mr. and Mrs. Crossman were representing "Florence Lustig" and then that the "Florence Lustig shop can sell" certain items; the corporation is not mentioned in the body of the agreement.

Babs, Inc., asserts that if either it or the Hotel had sought to enforce the May 9 undertaking against Lustig, the individual defendant would have been protected by the corporate shield of Florence Lustig, Inc. This case, however, presents a typical situation in which the corporate veil would have been pierced, and the dominant shareholder held responsible. Cf. Riesen v. Maryland Cas. Co., 1943, 153 Fla. 205, 14 So.2d 197.² The corporation was never in possession of the premises, it never engaged actively in any business venture, and it did not even have a bank account. See 286 F.2d 930. The interest of the corporation and the shareholder were identical; the corporation was the...