III Lounge, Inc. v. Gaines, 86-030
| Decision Date | 12 February 1988 |
| Docket Number | No. 86-030,86-030 |
| Citation | 419 N.W.2d 143,227 Neb. 585 |
| Parties | III LOUNGE, INC., a Nebraska Corporation, Appellant and Cross-Appellee, v. Tyler B. GAINES, Trustee, Appellee and Cross-Appellant. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Equity: Appeal and Error. Actions in equity, on appeal to the Supreme Court, are triable de novo on the record, subject, however, to the rule that when credible evidence on material questions of fact is in irreconcilable conflict, the Supreme Court may, in determining the weight of the evidence, consider the fact that the trial court observed the witnesses and their manner of testifying and must have accepted one version of the facts rather than the opposite.
2. Contracts: Specific Performance. In an action where specific performance is decreed, courts ordinarily attempt to place the parties in the same position in which they would have been if the contract had been performed at the time agreed upon.
3. Contracts: Specific Performance: Vendor and Vendee: Damages. If the purchaser is awarded rents, rental value, or profits from the premises during the delay in the performance of the contract to purchase realty, the vendor may deduct from them ordinary carrying charges paid during the delay, including taxes, insurance, utilities, and reasonable repairs.
4. Damages: Proof. The plaintiff must plead and prove damages, and bears the burden of offering evidence sufficient to prove such damages. The plaintiff's burden of proof cannot be sustained by evidence which is speculative and conjectural. Proof of damages to a mathematical certainty is not required; proof is sufficient if evidence is such as to allow the trier of fact to estimate actual damages with a reasonable degree of certainty and exactness.
5. Contracts: Specific Performance: Vendor and Vendee: Damages: Liability: Interest. If the delay in the performance of a contract was caused by the vendor, and the purchaser is not awarded rents, rental value, or profits, and has not been in possession of the property during the delay, the purchaser is not liable for interest on the unpaid purchase money.
Donald W. Kleine of Kleine Law Office, Omaha, for appellant.
David D. Ernst of Gaines, Otis, Mullen & Carta, Omaha, for appellee.
This is the second appearance of this case in this court. In III Lounge, Inc. v. Gaines, 217 Neb. 466, 348 N.W.2d 903 (1984), this court held that plaintiff, III Lounge, Inc., was entitled to specific performance of an option to purchase real estate from defendant, Tyler B. Gaines, trustee, and remanded the cause to the district court for Douglas County to enter a decree in accordance with the opinion. Plaintiff appeals and defendant cross-appeals from the order of the district court on remand, awarding damages to the defendant. We vacate in part and affirm in part.
The plaintiff commenced leasing the premises at 1515 Dodge Street in Omaha from the defendant in 1972 and operated the Canopy Lounge in the leased space. On December 7, 1981, plaintiff attempted to exercise its option to purchase the leased premises, but the defendant refused to honor plaintiff's option to purchase the property.
Plaintiff then filed action against the defendant for specific performance of the option to purchase. The district court, after hearing the case, denied the relief requested by plaintiff, and plaintiff then appealed the case to this court, the decision in which case is set forth in III Lounge, Inc. v. Gaines, supra. This court held that the plaintiff had complied with the conditions and was entitled to exercise its option to purchase the premises at 1515 Dodge Street and that the defendant wrongfully failed to honor plaintiff's option to purchase. Pursuant to the mandate of the Supreme Court, the parties stipulated that all damages resulting from the defendant's failure to perform be heard and determined by the district court.
In March 1985, a hearing was held before the Honorable Stephen A. Davis, one of the judges of said court, for the determination of the damages. The district court entered an order awarding damages to Gaines, and plaintiff filed a motion for new trial, claiming that the district court had not received all of the evidence. The district court sustained plaintiff's motion for new trial, and the hearing on damages was resumed on August 26, 1985.
On November 21, 1985, the district court for Douglas County entered an order instructing plaintiff to add the amount of $12,749.34 to the purchase price of the subject premises and awarded Gaines $900 in back rent. The court also instructed plaintiff to comply with the option to purchase within 30 days. Plaintiff in turn filed a motion for new trial, challenging the district court's order of November 21, which motion was overruled by the district court. Plaintiff then perfected its appeal to this court.
In its brief on appeal, III Lounge makes three assignments of error: (1) The district court erred in awarding defendant compensation for taxes, utilities, insurance, and repairs and maintenance expended by the defendant, inasmuch as the property did not generate any rents or profits; (2) the court erred in failing to offset from the purchase price lost profits suffered by the plaintiff as a result of the defendant's failure to perform the contract; and (3) the district court erred in awarding defendant damages for plaintiff's vacation of the premises 2 months early.
Defendant cross-appeals and assigns that the court erred in denying Gaines interest on the purchase price.
The evidence in this case reveals that III Lounge, doing business as the Canopy Lounge, has been doing business at 1515 Dodge Street since 1972. John Digilio, who was the manager of the Canopy Lounge, testified on behalf of the plaintiff. He testified that the plaintiff began leasing the premises from the defendant in 1972, that the lease in question contained an option to purchase the premises, and that the plaintiff attempted to exercise its option to purchase the premises prior to April 30, 1982, which was the date the lease in question expired, having been renewed one time since its inception.
As previously stated, this court held that the defendant wrongfully denied the plaintiff its option to purchase the premises in question. It appears from the record that the plaintiff remained as a holdover tenant of the premises from May through December of 1982 and, also, that Digilio twice attempted to tender rent, for May and June of 1982, but such tender was refused by the defendant each time, and Digilio was told to vacate the premises. It next appears that on November 1, 1982, the plaintiff was unable to renew the liquor license for the premises because it had neither a lease nor a deed to the premises. See Neb.Rev.Stat. § 53-125 (Cum.Supp.1982).
Digilio further testified that after the plaintiff was refused the liquor license, he tried to maintain the business by just selling lunches, but he closed because it was not profitable. The record reveals that the plaintiff vacated the premises in December 1982. The 1980 and 1981 income statements, admitted into evidence, reveal that the Canopy Lounge operated at a net loss of over $1,000 in each of the 2 years. Digilio further testified that business suffered in 1982 because access to the premises was limited due to repairs on Dodge Street. We point out, however, that Dodge Street was only closed in 1982 and 1983, so it would appear that this factor had nothing to do with the net losses incurred in 1980 and 1981.
James DiPrima, who had been the accountant for III Lounge since 1971, testified on behalf of the plaintiff. DiPrima prepared the 1981 income statement which was used as the basis for an income/expense projection for the years 1984 and 1985. This was done for the reason that 1981 was the last full year that the Canopy Lounge was in business before problems with the business developed.
It appears that DiPrima did not prepare a projection for the year 1983 because he felt that he could not conservatively estimate the sales because of Dodge Street's being torn up that year. He testified that the profit projections were conservative because the sales figures used were the same as in 1981. However, there were two noticeable differences between the 1981 income statement and the 1984-85 profit projections. First, in 1981, the plaintiff incurred a net loss of $1,101, whereas the accountant projected that the plaintiff lost $28,600 in profits because of the fact the plaintiff was not in operation in 1984 and 1985. Second, the accountant projected 1984-85 gross profits at 60 percent of total sales, although from 1980 through 1982 gross profits were running between 35 and 40 percent. The accountant attributed this difference to the possibility and assumption that excessive food costs would be eliminated inasmuch as the business was generating a loss in that area. The accountant did not increase the amount of sales from 1981 to the 1984-85 projections, partially because he anticipated liquor sales would drop off as a result of eliminating food.
The record further reveals that Jeffrey Modica, who was the property manager used by the defendant, testified on behalf of the defendant that the last rental received from the plaintiff on the property in question was on April 30, 1982. He further testified that his company had not attempted to put another tenant in the premises after the plaintiff vacated the premises because of the present damage to the building and the present litigation. Modica estimated the fair rental value of the property in its current condition to be between $150 and $200 a month. He testified that the expenses incurred for 1515 Dodge Street since the time plaintiff vacated the premises through June 30, 1985, were broken down as follows: utilities, $2,451.84; insurance,...
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