Miami Intern. Realty Co. v. Paynter

• Decision Date: 02 March 1988
• Docket Number: No. 86-1302,86-1302
• Citation: 841 F.2d 348
• Parties: 24 Fed. R. Evid. Serv. 1196 MIAMI INTERNATIONAL REALTY CO., Plaintiff, Counterclaim Defendant, Appellee, v. Richard PAYNTER and Paynter & Hensick, P.C., Defendants, Counterclaimants, Third Party Plaintiffs, Appellants, v. Marilyn LEFF, Martin Marcus, Sportsman Resort West, Inc., Saul Rudes, George Lax, Rudes & Lax, a law firm, Third Party Defendants, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 348

841 F.2d 348

24 Fed. R. Evid. Serv. 1196

MIAMI INTERNATIONAL REALTY CO., Plaintiff, Counterclaim Defendant, Appellee, v. Richard PAYNTER and Paynter & Hensick, P.C., Defendants, Counterclaimants, Third Party Plaintiffs, Appellants, v. Marilyn LEFF, Martin Marcus, Sportsman Resort West, Inc., Saul Rudes, George Lax, Rudes & Lax, a law firm,

Third Party Defendants, Appellees.

No. 86-1302.

United States Court of Appeals Tenth Circuit.

March 2, 1988.

Rehearing Denied Nov. 29, 1988.

Paul D. Cooper of Cooper & Kelley, P.C. (Kim B. Childs and Charles R. Ledbetter, with him on the brief), Denver, Colo., for defendants, counterclaimants, third party plaintiffs, appellants.

B. Lawrence Theis of Walters & Theis, Denver, Colo., for plaintiff, counterclaim defendant, appellee.

John D. Phillips of Hall & Evans (Daniel W. Pinkston, with him on the brief), Denver, Colo., for third party defendants, appellees Saul Rudes, George Lax and Rudes & Lax.

Before HOLLOWAY, Chief Judge, and SETH and McWILLIAMS, Circuit Judges.

SETH, Circuit Judge.

Miami International Realty Company ("Miami") sued Richard T. Paynter and his law firm, Paynter & Hensick, P.C. (collectively "Paynter"), in this diversity case for attorney malpractice. After a ten day jury trial, the jury rendered a verdict in favor of Miami, finding that Paynter had breached his professional duty to Miami thereby causing Miami to lose future profits which it otherwise would have received as the promoter of a time-share project in Mount Crested Butte, Colorado. The jury awarded $2,100,000 in damages to Miami, finding that it had lost $3,000,000 in profits and further finding that Paynter was 70% liable for that loss. In this appeal from the jury verdict, Paynter argues that the trial judge erred in several trial and pre-trial rulings.

Miami began to promote the Eagle's Nest Townhouses as a time-share project in early 1981. The time-share interests were marketed by Miami, as well as by Sportsman Resort West, Inc. and Sportsman Resort West of Texas, corporations which were apparently formed exclusively for the purposes of providing escrow and marketing support to Miami.

In the summer of 1981, Martin L. Marcus ("Marcus"), Miami's chief executive officer, learned that Miami could not legitimately engage in business in Mount Crested Butte unless it had a town business license. Near the end of 1981, neither Miami nor its related corporations had the town licenses. Marcus was then contacted by Paynter who was at that time a lawyer in private practice as well as the Mount Crested Butte town attorney. Paynter again informed Marcus that Miami could not operate legally in the town without the licenses. At a subsequent meeting Paynter suggested that he be retained by Marcus to obtain the licenses. Marcus, who before had unsuccessfully applied for the licenses, agreed to retain Paynter for assistance in getting the licenses.

As events unfolded, Paynter never helped in obtaining the licenses for Miami. At a February 4, 1982 meeting, Paynter advised Marcus that the town manager had pressured Paynter into terminating his attorney-client relationship with Miami because of a potential conflict of interest. Paynter further advised Marcus that the Colorado Real Estate Commission ("CREC") had undertaken an investigation of Miami and had concluded that Miami could not continue with the time-share project unless it was registered with the state as a subdivision developer. At this same meeting Marcus allowed Paynter to withdraw from further representation of Miami as to those matters which presented a potential conflict of interest for Paynter as the town attorney. Marcus requested, however, that Paynter continue to represent Miami to obtain the subdivision developer registration required by CREC. Paynter agreed to do so.

What remained of the attorney-client relationship between Paynter and Miami quickly soured after the above meeting. Paynter filed a three-count municipal offense charge against Marcus, one of his employees, and Sportsman Resort West of Texas on February 5, 1982 for operating without the town licenses which Paynter had been earlier retained, but failed, to obtain. Paynter prosecuted these charges until he was admonished by the presiding judge to withdraw from the case because of the apparent conflict of interest. Also, Paynter failed to tell Marcus that CREC officials had left a message at Paynter's office directing that Miami cease sales of time-share interests until Miami obtained the subdivision developer registration. Furthermore, Paynter advised CREC officials in a telephone conversation of February 11, 1982 that Miami would be likely to continue its sales operations regardless of his advice and that CREC should file a lawsuit against Miami if it wished to stop further sales.

Thereafter Paynter wrote to Marcus to inform him that the subdivider's registration application which he had submitted to CREC had been denied. However, this letter failed to inform Marcus of a telephone conversation Paynter had with CREC officials that CREC was contemplating a lawsuit against Miami, and that Miami could avoid the lawsuit by stopping its sales activity. Although Marcus was not told, Paynter informed the town council on the same day of the letter that CREC was going to file a suit against Miami. Indeed, several days later CREC filed a suit against Miami and obtained a temporary restraining order enjoining Miami from future sales activity. Miami's suit for attorney malpractice ensued.

Paynter argues that the trial court erred in failing to grant a directed verdict motion at the close of Miami's case. He contends that his motion should have been granted because Miami failed to prove, with the requisite degree of certainty, that it had suffered lost profits damages as a result of the claimed malpractice.

Whether to grant a motion for a directed verdict is a decision left to the discretion of the trial court. Ward v. H.B. Zachry Construction Co., 570 F.2d 892, 896 (10th Cir.). In determining whether the trial court has abused its discretion in denying such a motion by a defendant, we must look at the evidence in the light most favorable to the plaintiff. Ramsey v. Culpepper, 738 F.2d 1092, 1097 (10th Cir.).

In examining plaintiff's evidence on the issue of lost profits damages, we apply the substantive law of Colorado. Under Colorado law, a plaintiff who seeks lost profits as a measure of damages must prove by competent evidence that such profits would have been received but for the injury caused by the defendant. Republic National Life Insurance Co. v. Red Lion Homes, Inc., 704 F.2d 484, 489 (10th Cir.). Once the fact of damages is proved by a preponderance of the evidence, "uncertainty as to the amount of damages will not bar recovery." Tull v. Gundersons, Inc., 709 P.2d 940, 943 (Colo.) (emphasis added). As stated by the Colorado Court of Appeals in Cope v. Vermeer Sales and Service of Colorado, Inc., 650 P.2d 1307, 1309 (Colo.App.):

"The rule which precludes recovery of uncertain and speculative damages applies only where the fact of damages is uncertain, not where the amount is uncertain."

We applied Colorado law in Republic National Life Insurance Co., 704 F.2d at 489, when we held that once the loss of profits is attributed to the injury by the defendant, recovery of those lost profits as damages will not be denied "simply because the amount of profit lost is difficult to ascertain."

When we review the evidence in the light most favorable to Miami, it must be concluded that the fact of damages was proved by credible and substantial evidence. There is ample evidence in the record indicating that the time-share project would have been profitable for Miami. Furthermore, there is evidence in the record to support a jury conclusion that Miami lost these prospective profits as a result of Paynter's malpractice. In response to a special verdict question as to whether "the plaintiff, Miami International Realty Company, incur[red] damages," the jury responded in the affirmative. We hold that the jury's determination that Miami, itself, did suffer the damages occasioned by Paynter's malpractice is supported by evidence received during Miami's case-in-chief.

Neither can we accept as persuasive Paynter's contention that the nature of the evidence on the fact and quantum of lost profits damages was incompetent as proof of lost profits. In Webb v. Utah Tour Brokers Association, 568 F.2d 670, 678 (10th Cir.), we held that the form of the evidence adduced in support of the claim for lost profits is not significant, so long as it is credible and substantial. Colorado courts have held that the testimony of the injured party in and of itself may provide a sufficient basis for an award of lost profits damages. Power Equipment Co. v. Fulton, 513 P.2d 234, 237 (Colo.App.); Heckman v. Warren, 238 P.2d 854, 861 (Colo.). In addition, a jury award of lost profits damages need not be supported by documentary evidence under Colorado law as testimony alone will suffice "if the testimony is sufficiently credible and detailed." Republic National Life Insurance Co., 704 F.2d at 490; see also Heckman, 238 P.2d at 861.

In the instant case, the jury heard the testimony of Miami's principals as to the mounting success of the time-share project. The jury also heard expert testimony on the long-term feasibility of the time-share project and expert testimony on the projected net profits of the project. This testimony was a sufficient foundation for the jury's finding on Miami's lost profits damages. Paynter's challenges to the nature of the assumptions employed by the experts in formulating their opinions is without merit. Paynter's counsel challenged the assumptions on cross-examination and the jury was left to determine the weight to be given the expert testimony.

Paynter's claim that Miami's lack of a profit history should preclude the recovery of lost profits damages is similarly...