Textron Fin. Corp. v. Nationwide Mut. Ins. Co.

• Court: Ohio Court of Appeals
• Writing for the Court: REECE; BAIRD; BAIRD
• Citation: Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 684 N.E.2d 1261 (Ohio App. 1996)
• Decision Date: 30 October 1996
• Docket Number: No. 17381,17381
• Parties: TEXTRON FINANCIAL CORPORATION, Appellee and Cross-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant and Cross-Appellee. * Ninth District, Summit County

Page 137

115 Ohio App.3d 137

684 N.E.2d 1261

TEXTRON FINANCIAL CORPORATION, Appellee and Cross-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant and Cross-Appellee. ^*

No. 17381.

Court of Appeals of Ohio,

Ninth District, Summit County.

Decided Oct. 30, 1996.

Guy, Lammert & Towne, and Rachel E. Nader, Akron, for appellee, Textron Financial Corporation.

Buckingham, Doolittle & Burroughs, Patrick J. Keating and Paul W. Allison, Akron, for appellee, United Computer Capital Corporation.

Brouse & McDowell, Mary K. Whitmer, John C. Fickes and Christopher F. Swing, Akron, for appellant, Nationwide Mutual Insurance Company.

REECE, Judge.

Appellant and cross-appellee, Nationwide Mutual Insurance Company, appeals from the jury verdicts rendered against it in the court of common pleas. Appellee and cross-appellant, Textron Financial Corporation, appeals various issues concerning punitive and liquidated damages, attorney fees and prejudgment interest. We reverse.

I

In 1987 Nationwide Mutual Insurance Company entered into a master lease agreement with Continental Information Systems Corporation. The agreement provided Nationwide would lease an IBM 3090-200E computer and accompanying equipment from CIS for $99,000 per month for a term of forty-eight months. The lease was to terminate on August 31, 1991. At the time of execution of the lease, the equipment was valued at approximately $4,687,213.

On November 13, 1987, CIS assigned its interest in the master lease to Textron Financial Corporation. Nationwide consented to the assignment on November 3, 1987. Thereafter, Nationwide made its monthly payments to Textron. On July 5, 1990, prior to the expiration of the master lease, Nationwide entered into a sublease agreement with United Computer Capital Corporation. The sublease term, beginning July 1, 1990, was to run for fourteen months with monthly payments of $41,500. On July 11, 1990, United executed a lease agreement whereby it subleased the IBM computer to Data Hardware, Inc.

Nationwide continued to make monthly payments to Textron as required by the original master lease. On August 28, 1991, three days prior to the expiration of the master lease and after Nationwide tendered its final payment, Textron notified Nationwide that it was terminating the lease due to Nationwide's breach of the provisions of the master lease governing subleasing and the relocation of leased equipment. Nationwide notified United on August 29, 1991 that United would be required to have the subleased computer equipment certified by IBM and returned to Textron due to United's breach of the master, and secondary, leases by subleasing to Data Hardware without prior written consent. At Textron's request, the IBM 3090-200E was shipped to C.E. Services in Texas. The IBM computer arrived in Texas on September 4, 1991. The computer was IBM certified on September 6, 1991 and on September 30, 1991 Textron sold the computer to Data Hardware for $387,000.

On January 10, 1992, Textron filed a complaint against Nationwide in the Summit County Court of Common Pleas alleging breach of contract and unjust enrichment. On February 7, 1992, Nationwide filed a third-party complaint against United for indemnification. Textron amended its complaint on August 31, 1992, adding fraud and negligent misrepresentation to its claims against Nationwide. On May 28, 1993, the trial court granted summary judgment in Nationwide's favor as to Textron's claim for punitive damages. On that same date, the trial court also granted summary judgment in United's favor on the third-party complaint. This court reversed the trial court's judgment in United's favor, holding that the "trial court erred in concluding as a matter of law that UCCC [United] effectively cured its failure to procure consent before subleasing the computer to Data Hardware." Nationwide Mut. Ins. Co. v. United Computer Capital Corp. (Mar. 16, 1994), Summit App. No. 16340, unreported, at 8, 1994 WL 78640.

Trial in this case began on November 14, 1994. On December 7, 1994, the jury returned verdicts in Textron's favor on its claims against Nationwide for breach of contract, fraud and negligent misrepresentation, and awarded Textron attorney fees. The jury also found in United's favor on Nationwide's third-party complaint. Nationwide moved for judgment notwithstanding the verdict on December 21, 1994. On May 8, 1995, the trial court heard the matter of attorney fees. On July 7, 1995, the trial court granted Nationwide's motion as to attorney fees, finding the jury's award of attorney fees void as against public policy. However, the trial court denied Nationwide's motion as to the jury verdicts in favor of Textron and United.

Textron moved the court for an award of prejudgment interest on July 20, 1995. Thereafter, Nationwide appealed and Textron cross-appealed. The trial court denied Textron's motion for prejudgment interest on October 6, 1995, finding that it lacked jurisdiction over the matter because the instant appeal was then pending in this court. Textron filed an amended notice of cross-appeal from the trial court's October 6, 1995 order on October 26, 1995.

II

Nationwide offers five assignments of error for our review, and Textron offers four. Based upon our disposition of Nationwide's first, second and third assignments of error, it will be unnecessary for us to discuss the other six assignments of error presented. See App.R. 12(A)(1)(c).

A

"The trial court erred in overruling the motions for summary judgment, directed verdict and for judgment notwithstanding the verdict by Nationwide Mutual Insurance Company on the claim against it by Textron Financial Corporation for breach of contract."

Textron claims that Nationwide committed six acts in breach of the master lease agreement: (1) Nationwide did not maintain an IBM maintenance contract for the term of the master lease as required by Section 7 of the master lease; (2) Nationwide altered the leased equipment in 1989 by installing an IBM 4128 feature without Textron's consent in violation of Section 8 of the master lease; (3) Nationwide entered into the sublease with United prior to obtaining Textron's consent in violation of Section 11 of the master lease; (4) Nationwide leased to a "non-end user" contrary to Textron's wishes; (5) Nationwide permitted United to enter into a second sublease without Textron's written consent in violation of Section 11 of the master lease; and (6) Nationwide shipped the computer equipment to Data Hardware in Minnesota in violation of Section 6 of the master lease. While Nationwide is technically guilty of four of the above contract violations, we hold that Textron failed to prove damages as a result of Nationwide's conduct. ¹

"Generally, a breach of contract occurs when a party demonstrates the existence of a binding contract or agreement; the nonbreaching party performed its contractual obligations; the other party failed to fulfill its contractual obligations without legal excuse; and the nonbreaching party suffered damages as a result of the breach." (Citations omitted; emphasis added.) Garofalo v. Chicago Title Ins. Co. (1995), 104 Ohio App.3d 95, 108, 661 N.E.2d 218, 226. A claimant seeking to recover for breach of contract must show damage as a result of the breach. Metro. Life Ins. Co. v. Triskett Illinois, Inc. (1994), 97 Ohio App.3d 228, 235, 646 N.E.2d 528, 532; Logsdon v. Ohio N. Univ. (1990), 68 Ohio App.3d 190, 195, 587 N.E.2d 942, 946. Damages are not awarded for a mere breach of contract; the amount of damages awarded must correspond to injuries resulting from the breach.

"As a general rule, an injured party cannot recover damages for breach of contract beyond the amount that is established by the evidence with reasonable certainty, and generally, courts have required greater certainty in the proof of damages for breach of contract than in tort." Rhodes v. Rhodes Indus., Inc. (1991), 71 Ohio App.3d 797, 808-809, 595 N.E.2d 441, 448. The damages awarded for a breach of contract should place the injured party in as good a position as it would have been in but for the breach. Such compensatory damages, often termed "expectation damages," are limited to actual loss, which loss must be established with reasonable certainty. Doner v. Snapp (1994), 98 Ohio App.3d 597, 601, 649 N.E.2d 42, 44.

In the present case, Textron failed to present any evidence of actual loss as a result of Nationwide's breach. Textron received forty-eight payments of $99,000 each, as required by the master lease. Nationwide continued making its monthly payments after the computer was subleased to United; Nationwide did not fail to make a payment. Additionally, Textron's computer was returned at the end of the lease term certified for an IBM maintenance contract, as required under the lease agreement. According to Karen Gustafson, an employee of Data Hardware, Textron's computer upon return "was a complete 200E exactly the way it came in, recertified again by IBM."

Textron argues that the actual damages it sustained should be calculated as equal to the value of the computer at the time of breach, i.e., July 1990. Although Textron did present evidence that the computer's value as of July 1990 was $2,250,000, Textron did not establish a causative link between this value and Nationwide's breach. Whereas the computer was valued at approximately $2.2 million in July 1990, at that time there was only approximately $1.3 million in payments remaining on the lease. Textron received that entire amount. We fail to see any correlation between the July 1990 value of the computer and Nationwide's breach of the lease agreement. Textron presented no evidence that the computer's value was diminished by the sublease to Data Hardware; there was no evidence showing that the 200E returned to Textron at the end of the four-year lease was of a lesser value than other 200Es then on the market.

In short, upon return of the computer to...