Pringle Tax Service, Inc. v. Knoblauch, No. 62792

• Court: United States State Supreme Court of Iowa
• Writing for the Court: Considered by REYNOLDSON; McCORMICK
• Citation: 282 N.W.2d 151
• Docket Number: No. 62792
• Decision Date: 29 August 1979
• Parties: PRINGLE TAX SERVICE, INC., an Iowa Corporation, d/b/a Carroll Copy Center, Appellee, v. Charles E. KNOBLAUCH, Appellant.

Page 151

282 N.W.2d 151 PRINGLE TAX SERVICE, INC., an Iowa Corporation, d/b/a Carroll Copy Center, Appellee,
v.
Charles E. KNOBLAUCH, Appellant. No. 62792. Supreme Court of Iowa. Aug. 29, 1979.

Page 152

Greg Knoploh, of Kersten, Opheim, Carlson, Estes & Trevino, Fort Dodge, for appellant.

Considered by REYNOLDSON, C. J., and LeGRAND, REES, McCORMICK and McGIVERIN, JJ.

McCORMICK, Justice.

The question here is whether exemplary damages may be awarded when actual damages have been sustained but not computed or awarded. The trial court held they may be, and we affirm.

Plaintiff Pringle Tax Service, Inc., bought Carroll Copy Center, a printing and duplicating business in Carroll, from defendant Charles E. Knoblauch in May 1976. The sale agreement included a covenant not to compete in which defendant promised not to own, operate or manage any printing business or direct mail service in Carroll County for a period of five years from the date of the agreement.

The present action in equity was commenced by plaintiff in October 1976. Plaintiff alleged defendant was violating the covenant not to compete by operating a printing business called Economy Quick Print in Carroll. In one division of the petition, plaintiff requested an injunction against defendant's violations of the covenant. In a second division, plaintiff alleged defendant tortiously interfered with its business by slanderous and disparaging remarks and publications, theft of customer lists, and violation of the covenant not to compete. Plaintiff asserted defendant's actions were intentional and malicious, prayed for an accounting and judgment for lost profits, and requested exemplary damages.

After hearing, a temporary injunction was entered against defendant in November 1976, restraining him from participating in the operation of Economy Quick Print and from soliciting business for it.

The case went to trial in October 1978 with defendant representing himself. At trial defendant acknowledged he had sought and obtained customers of plaintiff in behalf of Economy Quick Print before being enjoined from doing so. Certain of these customers were identified. However, defendant revealed he had in August 1978 destroyed the records of Economy Quick Print which would have shown how much income that business received from them. Even though plaintiff's president testified plaintiff's gross profit from sales averaged seventy percent, the volume of lost sales was estimated only generally. The record does support an inference that defendant's wrongful activities caused a substantial part of this loss.

The trial court found defendant violated the covenant not to compete. However it also found plaintiff was prevented by defendant's destruction of evidence from proving the amount of its actual damages. In doing so, the court said "there is no question in the court's mind that there were actual damages suffered by plaintiff, and that the same were of more than a nominal amount . . . ." Despite its inability to compute an award of actual damages, the

Page 153

court found that the elements to support an allowance of exemplary damages were present and awarded plaintiff $2500 of exemplary damages. Defendant appealed.

During the appeal he contended for the first time that the trial court erred in awarding exemplary damages because such damages cannot be recovered for breach of contract, citing Pogge v. Fullerton Lumber Co., 277 N.W.2d 916 (Iowa 1979). This contention is untenable for two reasons. First, it is untimely because it was not urged in the trial court. In addition, it overlooks the fact that plaintiff alleged defendant's breach of contract also tortiously interfered with its business relationships. See Clark v. Figge, 181 N.W.2d 211, 213-14 (Iowa 1970). Exemplary damages may be awarded when conduct breaching a contract also constitutes an intentional tort committed maliciously. See Pogge, 277 N.W.2d at 920.

In the absence of any indication to the contrary, the trial court's finding that the elements to support a punitive damage award were established must be construed as holding the necessary showing was made. See City of Des Moines v. Huff, 232 N.W.2d 574, 576 (Iowa 1975) ("When, as here, the court makes only a general finding, every finding of fact necessary to support the decision appealed from will be presumed to have been made."). Moreover, from our de novo review of the record, we find defendant did maliciously commit the tort of interference with business relationships in breaching the non-competition covenant.

Another preliminary matter is plaintiff's failure to assist this...