Gasser v. John Knox Village, WD

• Decision Date: 06 December 1988
• Docket Number: No. WD,WD
• Parties: William GASSER, R. Ph., Appellant, v. JOHN KNOX VILLAGE, et al., Respondents. 40215.
• Court: Missouri Court of Appeals

Page 728

761 S.W.2d 728

William GASSER, R. Ph., Appellant, v. JOHN KNOX VILLAGE, et al., Respondents.

No. WD 40215.

Missouri Court of Appeals,

Western District.

Dec. 6, 1988.

Bert S. Braud, Kansas City, for appellant.

James M. Beck, Sheldon D. Korlin, Kansas City, for respondents.

Before FENNER, P.J., and MANFORD and GAITAN, JJ.

FENNER, Judge.

Appellant, William Gasser, filed a Third Amended Petition against respondent, John Knox Village, in June of 1984, seeking damages for breach of contract. The case was tried by a jury which returned a verdict on September 26, 1987, in favor of Gasser in the amount of $107,000. John Knox Village filed a motion for judgment notwithstanding the verdict or in the alternative for a new trial. The trial court granted the motion for judgment notwithstanding the verdict, from which grant Gasser now appeals. The motion for new trial was overruled.

In reviewing the trial court's decision to grant the motion for judgment notwithstanding the verdict, after a verdict was rendered for plaintiff, Gasser, the evidence, along with all reasonable inferences deducible therefrom, must be viewed in the light most favorable to Gasser. Luyties Pharmacal Co. v. Frederic Co., Inc., 716 S.W.2d 831, 833 (Mo.App.1986). Therefore, the facts are stated in accord with this standard of review.

Gasser is a registered pharmacist in Lee's Summit, Missouri. John Knox Village (hereinafter JKV) is a not-for-profit corporation which provides life-care residence and skilled nursing for the elderly. Gasser began negotiating a lease in the fall of 1978 for space at JKV to operate a pharmacy. Gasser was mainly interested in providing pharmaceuticals to patients in the skilled nursing facility known as the Village Care Center (hereinafter VCC) and in getting a guarantee that his pharmacy would be the exclusive provider of prescription business generated by the VCC. At the time of the negotiations a Mr. Graham Hutchins, the nursing home administrator, was primary contact for JKV.

Following the negotiations, Gasser leased approximately 600 square feet from JKV, commencing October 1, 1978 to operate a retail drug store. Pursuant to renewals of such lease, Mr. Gasser occupied the leased premises continuously from October 1, 1978, through September 30, 1987.

At the time the lease was entered Gasser began operating the pharmacy and began receiving orders from the VCC. The pharmacy was run under a traditional bottle system for the delivery of drugs. On March 26, 1982, JKV requested Gasser and several other pharmaceutical suppliers to make proposals for the development and delivery of a unit dose delivery system. A unit dose delivery system is a system whereby the drugs are placed in a plastic card with bubbles to hold each pill. Drugs are placed in each bubble then the bubble is sealed using heat. The bubble packet is then snapped into a plastic container and a label for the prescription is placed on the container. The proposal requested by JKV was for a seven day modified unit dose system whereby prescriptions would be filled for a maximum of seven days. Following each seven day period a new prescription would be filled. The unit dose system is preferable to the bottle system because of its increased accuracy in ensuring that the correct number of doses are administered.

Gasser did not submit a proposal for a unit dose delivery system, upon advice of his attorney. By letter, Gasser's attorney advised JKV that Gasser would not submit a proposal because the attempt to implement such proposal was in violation of Gasser's exclusive rights under his lease. On October 6, 1982, Parkville Apothecary, Ltd., was awarded a contract to provide a unit dose delivery system to the VCC along with a supporting computer system selected by the VCC administration. Use of the unit dose delivery system began in November, 1982.

According to Gasser, from the time of the alleged breach in 1982, his business suffered a drastic reduction in net profits. JKV does not argue the question of breach in this appeal. In order to prove his loss Gasser introduced evidence at trial regarding the net profits of his business from 1978 through 1986.

Gasser's wife Sandra, who did the bookkeeping for the pharmacy, testified that prior to the alleged breach of the lease she and her husband had 90% of the pharmaceutical business from the VCC. She testified that net profits represented gross receipts minus the cost of merchandise and other expenses including rent, telephone, insurance, wages, delivery and licensing. As to the net profits of the pharmacy prior to the alleged breach in 1982, Mrs. Gasser testified as follows: 1979--$56,783; 1980--$43,053; 1981--$42,522; 1982--$46,976. For the years following the implementation of the unit dose delivery system she testified as follows: 1983--$26,743; 1984--$16,121; 1985--$22,009; 1986--$16,455. These amounts were taken from the Federal income tax returns that were prepared by Mrs. Gasser and admitted into evidence at trial only as proof of the net profits.

Gasser also retained the services of Mark Hauber, an accounting expert who testified as to an estimate or projection of lost profits for the period of the claimed loss. According to Hauber, the projection of lost profits over the period of the lease following the alleged breach, was in the amount of $211,047. He arrived at this figure by reviewing the records of the pharmacy, including cash register tapes, the general journal, the general ledger and tax returns. By reviewing the past figures on historical data of a business and through the use of percentages, assumptions and averages applicable to accounting practices, Mr. Hauber testified that he could determine projected profits following the breach. Mr. Hauber also based his projection on the expenses which would have to be incurred by the pharmacy had Gasser implemented the unit dose delivery system. Additionally, Mr. Hauber had available for comparison the revenues or summary of monthly gross sales for Parkville Apothecary beginning December 1, 1982 and ending July 1, 1987--some five and one-half years. Finally, Mr. Hauber had prepared a schedule of sales made by the Gasser Pharmacy to VCC for every year from 1978 through 1987. He obtained the amounts from information provided him in the books, records and general ledgers of the pharmacy. To compute the amount of sales made by the Gasser Pharmacy to VCC it was necessary to subtract the amount of sales made to other apartment residents at JKV.

In point one Gasser argues that the trial court erred in granting the motion for judgment notwithstanding the verdict in favor of JKV because sufficient evidence was presented to make a submissible case on lost profits. In granting the judgment notwithstanding the verdict the trial court found that Gasser had failed to meet the burden of establishing anticipated profits with reasonable certainty. The trial court, in reaching this conclusion, relied on Brown v. McIBS Inc., 722 S.W.2d 337 (Mo.App.1986), and the case therein cited of Yaffe v. American Fixture, Inc., 345 S.W.2d 195 (Mo.1961), in finding that in Missouri, damages for loss of anticipated profits resulting from the actionable conduct of another are recoverable only when they are made reasonably certain by proof of actual facts which present data for a rational estimate of such profits. The trial court found that the proof must be sufficiently definite so as to allow a reasonably accurate estimate of the loss without resorting to speculation. Tnemec Company, Inc. v. North Kansas City Development Co., 290 S.W.2d 169, 174 (Mo.1956). Further, the trial court found that to satisfy this standard of proof, the evidence must include the income and expenses of the business for a reasonable anterior period, with a consequent establishing of the net profits during the previous period, citing Brown, supra at 341.

JKV maintains that Gasser failed to prove his claim of lost net profits with reasonable certainty because there was no evidence presented regarding the pharmacies actual income and expenses from sales of pharmaceuticals to the VCC and what evidence was presented lacked a proper foundation and was speculative. More specifically, JKV points to the testimony at trial of Mrs. Gasser, the pharmacy bookkeeper, and Mr. Hauber, the expert accountant. JKV argues that Mrs. Gasser's testimony established the failure of the pharmacy to keep financial records in that she testified there was no accurate source document to identify sales to the VCC, no way to determine the cost of goods sold to VCC patients and she admitted that the inventory information which formed the data for the tax returns were not produced through an actual physical inventory. JKV also directs this court's attention to the testimony of Mr. Hauber wherein he stated the sales to the VCC and the cost of goods sold prior to or after the implementation of the unit dose system could not be determined because of the way the records were kept. Therefore, the argument goes, because there was no proof of actual lost profits on sales to VCC patients. Hauber had to resort to a projection of profits which had no factual basis because the assumptions, estimates and averages which formed the basis for Hauber's opinion were based on incomplete and inadequate tax and financial data.

Gasser, on the other hand, maintains that he has sustained his burden of proving the fact of damages, that is, lost profits, with a reasonable degree of certainty. He argues that once the fact of lost profits is proven, the next inquiry becomes whether there is sufficient evidence as to the amount of lost profits, proof of which requires a lesser degree of certainty. A great deal of emphasis is placed on the case of Ohlendorf v. Feinstein, 670 S.W.2d 930, 933 (Mo.App.1984), wherein the court noted the distinction drawn between the degree of certitude required to establish the fact of damages and the lesser certainty...