Fu Sheng Indus. Co., Ltd. v. T/F Systems, Inc.

• Decision Date: 26 February 1997
• Docket Number: 95-1074,Nos. 95-0826,s. 95-0826
• Citation: 690 So.2d 617
• Parties: 22 Fla. L. Weekly D514 FU SHENG INDUSTRIAL CO., LTD., a corporation organized under the laws of the Republic of China, Appellant, v. T/F SYSTEMS, INC., a Delaware corporation, and Robert C. Malt, an individual, Appellees. SOUTHEAST CAPITAL FINANCING, INC., a Florida corporation, and Purifiner Distribution Corp., an Illinois corporation, Appellants, v. T/F SYSTEMS, INC., a Delaware corporation, Robert C. Malt, an individual, and Fu Sheng Industrial Co., Ltd., a corporation organized under the laws of the Republic of China, Appellees.
• Court: Florida District Court of Appeals

Page 617

690 So.2d 617

22 Fla. L. Weekly D514

FU SHENG INDUSTRIAL CO., LTD., a corporation organized under the laws of the Republic of China, Appellant, v. T/F SYSTEMS, INC., a Delaware corporation, and Robert C. Malt, an individual, Appellees.

SOUTHEAST CAPITAL FINANCING, INC., a Florida corporation, and Purifiner Distribution Corp., an Illinois corporation, Appellants, v. T/F SYSTEMS, INC., a Delaware corporation, Robert C. Malt, an individual, and Fu Sheng Industrial Co., Ltd., a corporation organized under the laws of the Republic of China, Appellees.

Nos. 95-0826, 95-1074.

District Court of Appeal of Florida,

Fourth District.

Feb. 26, 1997.

Rehearing and Certification

Denied April 16, 1997.

William S. Graessle of Winegeart & Graessle, P.A., Jacksonville, for Appellant-Fu Sheng Industrial Co., Ltd.

David Charles Masselli and William C. Lane of Masselli & Lane, P.C., Arlington, VA, for Appellants-Southeast Capital Financing, Inc. and Purifiner Distribution Corp.

Philip M. Burlington of Caruso, Burlington, Bohn & Compiani, P.A., West Palm Beach, for Appellee-T/F Systems, Inc.

Richard S. Tolbert, West Palm Beach, for Appellee-Robert C. Malt.

DELL, Judge.

Sua sponte, we consolidate Case No. 95-0826 with Case No. 95-1074. These consolidated appeals arise out of a post-judgment order that awarded appellees T/F Systems, Inc. (T/F Systems), and Robert Malt (Malt) delay damages, jointly and severally, against appellants Fu Sheng Industrial Co., Ltd. (Fu Sheng), Southeast Capital Financing, Inc. (Southeast) and Purifiner Distribution Corp. (PDC). ¹

Refineco Manufacturing Corporation (Refineco) held the patent on an oil reclamation device known as the "Purifiner." Refineco entered into a contract with T/F Systems wherein Refineco promised certain distribution rights in a four-state territory to T/F Systems for the product which would be sent to T/F Systems from PDC. The contract provided that if PDC failed to deliver the requisite amount of product to T/F Systems, then T/F Systems would become entitled to the exclusive right to manufacture and market the product on a worldwide basis. PDC assumed the obligations assigned to T/F Systems in a separate contract with Refineco. On June 10, 1990, PDC failed to fulfill its responsibilities under its contract. On July 27, 1990, Malt became the owner of the Refineco patents. During this time frame, PDC entered into a contract giving Fu Sheng the right to manufacture the product for PDC. Fu Sheng thereafter established a new company, Southeast, to serve as the financing arm for PDC. Fu Sheng did not directly finance, assist nor market the product for PDC.

In 1990, appellee T/F Systems filed suit for declaratory judgment to determine its right to manufacture and market the Purifiner. T/F Systems joined Southeast, PDC, Fu Sheng and Malt as codefendants in the declaratory relief action. T/F Systems also sought a money judgment against PDC based upon a loan that T/F Systems claimed had been assumed by PDC. Malt, as owner of the Purifiner patent, filed a counterclaim and a cross-claim seeking to recover a five percent royalty on all sales of the Purifiner. T/F Systems alleged that all parties claimed certain rights and interests to manufacture and market the Purifiner device through various agreements with Refineco.

After a non-jury trial, the trial court entered a judgment in which it found that: a letter agreement between T/F Systems and Refineco was a valid, enforceable contract; that on June 10, 1990, T/F Systems, pursuant to that agreement, obtained the exclusive right to manufacture and market products including the Purifiner product, the right to manufacture products under all of the Refineco foreign patents and the right to use the Purifiner trademark on all products manufactured and marketed by T/F Systems. The trial court also determined that, pursuant to an agreement with Refineco, PDC and Southeast were liable to pay T/F Systems for a loan in the amount of $110,000. The trial court ordered T/F Systems to account to Malt for all products sold under Malt's patents since September 21, 1990 and to pay a royalty of five percent on the list price of those units. The court did not award Malt royalties for sales made by PDC. The trial court also provided in its final judgment that "Purifiner Distribution Corp. shall immediately cease and desist from manufacturing the patented products and marketing same outside of its authorized territory as defined in its distribution agreement."

On September 16, 1991, Fu Sheng, Southeast and PDC appealed from the foregoing judgment. Malt cross-appealed the trial court's failure to require PDC to account to him for products manufactured and sold in violation of his patent rights. The trial court denied PDC's motion to set a supersedeas bond. However, this court relinquished jurisdiction and ordered the trial court to set an appropriate bond. T/F Systems and Malt sought a $15,000,000 bond. The trial court set the bond at $1,000,000. This court denied T/F Systems' and Malt's motion to seek review of the sufficiency of the bond.

The judgment in favor of T/F Systems was affirmed but that part of the judgment that failed to require PDC to account to Malt for the five percent royalty was reversed and the case was remanded for further proceedings. See Southeast Capital Fin., Inc. v. T/F Sys., Inc., 616 So.2d 482 (Fla. 4th DCA 1993). On remand, T/F Systems and Malt moved to execute on the supersedeas bond and to set an evidentiary hearing seeking to recover delay damages. The trial court ordered the surety to pay T/F Systems the amount of its money judgment against Southeast and PDC. The trial court reserved jurisdiction to award costs and to set an evidentiary hearing to determine the amount of delay damages.

T/F Systems alleged in its claim for delay damages that: "During the pendency of the appeal, Purifiner continued to manufacture and market the products, and as a result of the delay during the pendency of the appeal, T/F suffered additional money damages." Malt claimed that PDC had not paid royalties due to him for sales of the Purifiner product. The hearing on delay damages was first scheduled for August 11, 1993. The trial court, with the consent of appellants, granted T/F Systems' motion for a continuance. The hearing was rescheduled on at least two other occasions and then finally set on May 16, 1994. T/F Systems filed a notice of conflict of trial and scheduled a hearing on its motion for a continuance on May 11, 1994.

At the hearing, T/F Systems withdrew its motion for a continuance. Appellants then moved for a continuance based upon the unavailability of witness Steve Myrick. Appellants' counsel informed the court that Mr. Myrick was unavailable for trial due to his own illness and that of his wife and that he was Southeast's sole corporate representative with knowledge of all matters pertinent to the hearing. The trial court denied appellants' motion for continuance and the case proceeded to trial. Ultimately, the trial court relied upon a "forecast" presented by Mr. Myrick to Malt as the sole basis for the amount of damages awarded to T/F Systems for lost profits on sales by PDC and to Malt for royalties. The trial court also utilized the forecast to compute the gross profit margin that T/F Systems would have realized from the forecasted sales for PDC during the delay period. The trial court entered judgment in favor of Malt and against appellants for royalties in the amount of $418,980.54, plus costs, and in favor of T/F Systems and against appellants for lost profits on sales made by PDC and for lost prospective profits and costs in the total amount of $12,476,694.43.

Appellants raise four points in this appeal. They contend that: the trial court abused its discretion in denying their motion for a continuance; the trial court's award of delay damages for sales made by PDC was not supported by competent evidence; the trial court erred in awarding T/F Systems damages for lost opportunities; and the trial court erred in awarding delay damages in excess of the balance remaining on the supersedeas bond. Additionally, Fu Sheng contends that it cannot be held liable for PDC's sales because T/F Systems failed to prove that Fu Sheng caused its damages. We find merit in appellants' arguments and reverse and remand this cause for a new trial.

First, we agree with appellants' argument that the trial court abused its discretion when it failed to grant a continuance based upon Mr. Myrick's unavailability for trial. Upon learning that T/F Systems had withdrawn its motion for continuance, Southeast immediately moved for a continuance and stated in the motion:

[U]ndersigned counsel was informed by Mr. Myrick that he was recently hospitalized as the result of blacking out and that his wife [was] also recently hospitalized with manic-depression. Mr. Myrick has two children aged 10 and 12 and his wife is currently rehabilitating at home. He is unable to travel to West Palm Beach for the hearing which is scheduled for Monday, May 16--19, 1994.

3. Mr. Myrick is essential to this case, not only as the main witness but also as the sole corporate representative with knowledge of all matters involved pertaining to this hearing. It is essential and necessary for Mr. Myrick to appear at trial and to assist counsel.

Attached to the motion for continuance was a doctor's note stating that he had treated Mr. and Mrs. Myrick for "severe medical problems" and that he had recommended Mr. Myrick refrain from business or travel for thirty days. Appellants' attorney also informed the court:

I am here representing to the court the only reason we would ask for a continuance would be the situation with Steve Myrick's wife and the fact that she has been Baker-Acted. I need somebody to testify to two issues in this case, and he is, I wouldn't say, the only one. He's the primary one that could. When this happened I immediately made a bunch of phone calls...