Nehi Bottling Co., Inc. v. All-American Bottling Corp.

• Decision Date: 25 October 1993
• Docket Number: Nos. 92-1139,ALL-AMERICAN,92-1140,s. 92-1139
• Parties: NEHI BOTTLING COMPANY, INCORPORATED, Plaintiff-Appellant, v.BOTTLING CORPORATION, Defendant-Appellee. John ARMES, Plaintiff-Appellee, v.BOTTLING CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 157

8 F.3d 157

NEHI BOTTLING COMPANY, INCORPORATED, Plaintiff-Appellant, v. ALL-AMERICAN BOTTLING CORPORATION, Defendant-Appellee.

John ARMES, Plaintiff-Appellee, v. ALL-AMERICAN BOTTLING CORPORATION, Defendant-Appellant.

Nos. 92-1139, 92-1140.

United States Court of Appeals Fourth Circuit.

Argued June 8, 1993.

Decided Oct. 25, 1993.

Gregory Stephen Matney, Katz, Kantor, Perkins & Campbell, Tazewell, VA, argued (Douglas G. Campbell, Katz, Kantor, Perkins & Campbell, on the brief), for plaintiff-appellant.

John Robert McGhee, Jr., Kay, Casto, Chaney, Love & Wise, Charleston, WV, argued (Stephen A. Weber, Kay, Casto, Chaney, Love & Wise, on the brief), for defendant-appellee.

Before WILKINSON, Circuit Judge, SPROUSE, Senior Circuit Judge, and G. Ross ANDERSON, Jr., United States District Judge for the District of South Carolina, sitting by designation.

OPINION

SPROUSE, Senior Circuit Judge:

This appeal involves a sales contract and a lease and actions based on each of them. Nehi Bottling Company, Inc. ("Nehi") brought the first action against All-American Bottling Corporation ("All-American") alleging that All-American sold, and thereby converted, certain properties of Nehi not covered under a purchase agreement. The second action was brought individually by John Armes, the president of Nehi, and involved a lease between Armes, who is one of the owners of three leased buildings, and All-American. Armes claimed that All-American owed additional lease payments because of All-American's holdover beyond the lease term and that All-American was responsible for physical damages to the leased property. The conversion action and the lease action were consolidated for trial and a jury returned judgment for Nehi and Armes on all claims: $52,782 on the conversion claim; $47,878.54 on the holdover claim; and $15,749 on the claim for physical damage to the building. The district court, however, granted All-American's motion for judgment notwithstanding the verdict on the conversion claim. It denied All-American's motions for judgment notwithstanding the verdict and for a new trial on the lease claims. Nehi appeals from the district court's grant of judgment notwithstanding the verdict in favor of All-American on the conversion claim. All-American appeals from the judgment in favor of Armes on the lease claims.

As to the conversion claim, Nehi contends that the district court erred in holding that the purchase agreement executed between Nehi and All-American was unambiguous and in applying the agreement's provisions to require a j.n.o.v. for All-American. As to the judgment in the action involving the lease, All-American challenges the court's refusal to grant a j.n.o.v. or a new trial on the issue of holdover and physical property damages and also argues that the court erred in allowing the testimony of an expert witness. We reverse in part, reinstating the jury verdict on the conversion issue, but affirm the judgment in all other respects.

Nehi, terminating its bottling business in Bluefield, West Virginia, agreed to sell its business and the personal property involved in the plant's operation to All-American, a company which also produces and sells soft drinks. All-American attorneys prepared an "Asset Purchase Agreement," under which Nehi agreed to "sell substantially all of the assets and properties utilized in the operation of the Business," excluding cash and accounts receivable. The agreement referred to "Purchased Assets" and stated that complete lists of the items included in the Purchased Assets were set forth in Schedules 2(a)-2(d). The provision fixed the purchase price by stating that All-American was to pay Nehi a "Fixed Purchase Price" of $100,000 plus an "Inventory Purchase Price," which included inventory specified in Schedule 2(a). Schedules 2(a)-2(d) were to be attached to the contract. The fixed purchase price of $100,000 was paid and was not an issue in the litigation. The parties, however, failed to draft Schedules 2(a)-2(d), and there subsequently developed a dispute as to what inventory items were covered in the Asset Purchase Agreement. The day after signing the agreement, the parties executed a document entitled "Bluefield Inventory 11-28-84." It consisted of a list of inventory items deemed usable and salable by All-American but made no reference to the purchase agreement. The items on the Bluefield Inventory totaled $91,501.28.

The parties disagree over the purpose of the Bluefield Inventory. Nehi contends that its purpose was to compile a list of inventory to be conveyed by Nehi to All-American. Inventory not on the list, therefore, remained Nehi's property. All-American contends, however, that under the terms of the Asset Purchase Agreement, All-American purchased all of the assets of Nehi's business except for cash and accounts receivable. The purpose of the Bluefield Inventory, according to All-American, was to determine which items were to be used in calculating the "Inventory Purchase Price" portion of the total purchase price, as specified in the agreement.

The Inventory was compiled from an inspection at Nehi's Bluefield plant by Glen Thomas, All-American's General Manager, and Robert Armes, a member of the family that owned all of the stock in Nehi. During the inspection, Thomas advised Robert Armes that All-American could not use certain Nehi inventory, which consisted of bottles, cartons, concentrate, and other bottling plant supplies. In response, Robert Armes responded, "Okay," or "Just leave it sit." Nehi vacated the building, leaving the excess inventory. All-American changed the Nehi bottling plant into a warehouse. During this change, All-American removed inventory items not listed on the Bluefield Inventory from the facility. It either sold the items, transported them to its other plants, or otherwise disposed of them.

During the period when All-American was removing the unlisted inventory, one of Nehi's former employees, who then worked for All-American, advised John Armes that All-American was removing inventory not on the Bluefield list. In the fall of 1986, counsel for Nehi contacted All-American and demanded compensation for these inventory items, claiming that they had not been purchased by All-American. All-American rejected the demand.

Meanwhile, John Armes had entered into a lease agreement with All-American for three bottling plant buildings in Bluefield. ¹ The six-month lease required All-American to pay $505 per month in rent plus pro rata fire insurance, liability insurance, and county and town taxes. Under the lease, Armes was responsible for all major repair and maintenance of the property, including the roof, and All-American was responsible for "routine maintenance and housekeeping." The lease was renewable "for an additional six (6) month period, or more."

During its initial six-month lease period, All-American discovered that it could not operate profitably from the facility. In June of 1985, at the end of its six-month lease, All-American did not renew its lease, stopped paying rent, and ceased operations on the premises. However, the company continued to store obsolete equipment there. Whether Armes acquiesced to the equipment remaining on the premises was a disputed factual issue. In any event, several months after the lease expired, Robert Armes prevented All-American from removing some of the equipment still stored there, claiming that it owed back rent. All-American then entered into an agreement with John Armes under which All-American would sell a piece of equipment and divide the sale proceeds with John Armes. All-American subsequently sold the equipment and sent John Armes a check for $4,800. At the time of the trial, other equipment owned by All-American remained on the premises.

At trial, John Armes testified that he had not attempted to re-rent the property and that he had had opportunities to sell the property. He claimed that the premises were unusable because (1) All-American's equipment remained on the premises, and (2) All-American had caused extensive damage to the building. As to the building damage, approximately five weeks after All-American left the plant, Robert Armes entered it and found that the building had been damaged by water leaking from ruptured water pipes or through a crack in the roof. It was undisputed that All-American left the building unheated in January and February of 1985. At trial, the parties' experts had different views as to the cause of the damage. All-American's expert testified that the damage to the building could have been caused by construction defects in the roof, deterioration, and/or vandals, and Armes' expert testified that the crack in the roof was caused by the expansion of frozen water due to the lack of heat in the building. The water allegedly damaged the syrup room ceiling, the office ceiling, and the office carpet. Along with water damage, there was additional physical damage to the building including twelve broken window panes, a damaged front door, a damaged garage door, and ripped mesh wire on a basement window.

On August 14, 1987, Nehi sued All-American in the United States District Court for the Western District of Virginia for wrongful conversion of assets not included in the purchase agreement. It demanded $76,162.45 in damages. Also, on that day, John Armes brought an action against All-American in the same court alleging that All-American continued to occupy the premises as a holdover tenant and owed Armes rent, taxes, and insurance premiums under the lease. He demanded $76,908.08 in damages. In addition, Armes claimed $27,891 for physical damage to the building. The cases were consolidated and after a trial, the jury returned a verdict for Nehi of $52,782 on the wrongful conversion claims and awarded Armes $47,878.54 in holdover damages and $15,749 in physical damages on the lease claims. All-American moved for a judgment notwithstanding the verdict on the...