Stone v. Pico

• Decision Date: 10 April 2002
• Docket Number: 01-799
• Citation: 74 S.W.3d 591
• Parties: NOT DESIGNATED FOR PUBLICATION NORMAN "BUTCH" STONE AND THE CONCERT COMPANY APPELLANTS V. PAT PICO AND GARY GULU APPELLEES CA 01-799 ARKANSAS COURT OF APPEALS DIVISION IV
• Court: Arkansas Court of Appeals

NOT DESIGNATED FOR PUBLICATION

NORMAN "BUTCH" STONE AND THE CONCERT COMPANY APPELLANTS

V.

PAT PICO AND GARY GULU APPELLEES

CA 01-799

ARKANSAS COURT OF APPEALS DIVISION IV

APRIL 10, 2002

APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, [NO. CIV99-7927], HONORABLE JOHN WARD, CIRCUIT JUDGE

AFFIRMED

JOHN B. ROBBINS, JUDGE

Appellees Pat Pico and Gary Gulu sued appellants Butch Stone and The Concert Company for breach of contract and fraud. Following a bench trial, the judge awarded appellees $29,212.22 on their breach of contract claim and $22,500 on their fraud claim, plus $150,000 in punitive damages. On appeal, appellants challenge the finding of fraud and the imposition of punitive damages. We affirm.

In 1999, appellant Butch Stone, as president of The Concert Company, produced five outdoor concerts at Little Rock's Riverfront Amphitheater: dc talk, Journey/Foreigner, Hootie and the Blowfish, Willie Nelson, and a blues concert. Appellee Pat Pico, either with others or with appellee Gary Gulu, provided Stone with $195,000 as "advance funding" for the events. In return for their investment, appellees were to receive a percentage of the net proceeds generated by each event. Net proceeds were calculated as gross proceeds from ticket sales, merchandise sales, etc., less taxes and expenses. From those net proceeds, appellees would first recoup their investment, then their agreed-upon percentage. Additionally, appellees and Stone agreed that, on four of the concerts, appellees would receive a share of beer sales.

According to Stone's accounting records, three of the five concerts -- dc talk, Hootie, and the blues show -- did not produce sufficient revenue to cover expenses; therefore, appellees lost their investment on those shows. On the other two concerts -- Journey/Foreigner and Willie Nelson -- revenues exceeded expenses by $79,212.22. The trial judge ruled that appellees were entitled to that amount as partial recoupment of their investment.¹ Because Stone had already paid appellees $50,000, the judge awarded them an additional $29,212.22, as damages for breach of contract. There is no challenge on appeal to that award.

Appellees' fraud claim was based on the allegation that Stone skimmed money from concert beer sales, thus depriving appellees of their rightful share of those sales. At trial, two of appellants' former security guards, Mark Coleman and Ed Hill, testified that appellants kept quantities of beer in an underground storage area near Riverfront Park. Hill testified that, instead of the accounted-for beer that came from distributors' trucks, beer was brought out of the storage area to sell. Further, both he and Coleman testified that, during the course of a concert, Jerry Citti, the concessions manager, would take collection pouches gathered from the beer-selling sites down to the storage area, where he would remove money from them. According to Hill, Citti would give the money to him, and he would give it to Stone. Hill further testified that, before each concert, Stone would inform him of how much money he wanted off the top from the beer sales. According to Hill, Stone requested $18,500 from the Journey/Foreigner show; $15,000 from the Willie Nelson show; $8,000 from the Hootie and the Blowfish show; and $3,500 from the blues show, for a total of $45,000. Hill unequivocally testified that he and Citti "helped Stone steal beer money."

Jerry Citti denied any wrongdoing. He claimed that when he took money from the beer-sale pouches, he was merely reimbursing himself for start-up change. However, he gave no receipt for such reimbursement and he further testified that, after each show, the sales records from the beer-selling sites were destroyed. Stone and his show accountant, Larry Paladino, also denied that any skimming had occurred. Further, Bryan Day, the director of Little Rock's Department of Parks and Recreation, testified that he did not believe that any theft of beer proceeds had occurred.

Following a trial that featured the testimony of several witnesses and numerous complex exhibits, the court issued a letter opinion, which stated in pertinent part:

The Court believed the testimony of Mark Coleman, who was an insider in Stone's organization, and acted as Stone's bodyguard and head of security at Stone's concerts. Coleman detailed how the official beer counts were an illusion, in that Stone kept a separate supply of beer that he did not account for to the City, or investors. He further claimed that Stone had his people skim profits from beer sales, usually a minimum of $5,000. The amount of $18,500 was skimmed on the Journey show, $8,000 on Hootie, $15,000 on Nelson, and $3,500 on Blues.

. . . .

The Court finds that Butch Stone defrauded the plaintiffs, and as a result, owes them $22,500 [one-half of the above skim totals] on beer sales for which Stone skimmed money.

. . . .

For his fraud, the Court finds Mr. Stone should pay the sum of $150,000 in punitive damages to plaintiffs.

When the court entered the final judgment approximately two months later, the name "Mark Coleman" in the opinion letter was corrected to that of Ed Hill, who actually gave the testimony referred to.

Appellants argue first that there was not sufficient evidence to support a verdict for fraud. This case was tried to the circuit court sitting as factfinder. Therefore, we will not reverse the court's findings unless they are clearly erroneous. Ark. R. Civ. P. 52(a); and see Burke v. Elmore, 341 Ark. 129, 14 S.W.3d 872 (2000). Findings are clearly erroneous when, although there is evidence to support them, we are left, on reviewing the entire evidence, with the firm conviction that a mistake has been committed. See Betts v. Betts, 326 Ark. 544, 932 S.W.2d 336 (1996).

Fraud consists of some deceitful practice or willful device resorted to with the intent to deprive another of his rights or in some manner to do him injury. Mid-Continent Life Ins. Co. v. Hill, 192 Ark. 667, 94 S.W.2d 364 (1936). The elements necessary to prove fraud or deceit are: 1) a false representation of a material fact; 2) knowledge that the representation is false or that there is insufficient evidence on which to make the representation; 3) intent to induce action or inaction in reliance on the representation; 4) justifiable reliance on the representation; and 5) damage suffered as a result of the reliance. Stine v. Sanders, 66 Ark. App. 49, 987 S.W.2d 289 (1999). In a case at law, fraud must be proved by a preponderance of the evidence. Lancaster v. Schilling Motors, Inc., 299 Ark. 365, 772 S.W.2d 349 (1989).

Appellants argue that they had an accounting system in place that would have prevented the skimming of beer money. However, given the testimony of Hill and Coleman, it was not impossible for the skimming to have occurred, despite the presence of an accounting system. Appellants also argue that Ed Hill was a disgruntled former employee whose testimony should be disregarded. The trial judge expressly stated that he believed Hill (even though in his opinion letter, he confused Hill with Mark Coleman). In a case involving deceit, the credibility of the witnesses is vital in determining liability, and the trier of fact is the sole judge of the weight and credibility of the evidence. Stine v. Sanders, supra. A trial judge's finding regarding credibility is usually conclusive. See Firstbank of Arkansas v. Keeling, 312 Ark. 441, 850 S.W.2d 310 (1993). Based on the foregoing, we hold that the trial judge's finding of fraud is not clearly erroneous.

Appellants argue next that the award of punitive damages should be reversed. They claim first the trial judge imposed punitive damages without using any method to calculate the amount of damages, thus violating their constitutional right to due process. Appellants cite BMW of America v. Gore, 517 U.S. 559 (1996), in which the U.S. Supreme Court held that, while states have an interest in using flexible standards to award punitive damages, when an award is grossly excessive in relation to the state's interest, it may violate the due process clause.

The record does not reveal that this constitutional argument was made to the trial court. A constitutional argument regarding punitive damages is waived if made for the first time on appeal. See United Ins. Co. v. Murphy, 331 Ark. 364, 961 S.W.2d 752 (1998). In any event, if we were to reach this issue, we would uphold the award. In reviewing punitive damage awards, we consider the enormity of the wrong, the intent of the party committing the wrong, all the circumstances, and the financial and social condition of the defendant. Routh Wrecker Serv., Inc. v. Washington, 335 Ark. 232, 980 S.W.2d 240 (1998). We review the proof and all reasonable inferences therefrom in the light most favorable to the appellees, and we determine whether the award is so great as to shock the conscience of the court or demonstrate passion or prejudice on the part of the trier of...