Turtle Management, Inc. v. Haggis Management, Inc.

• Decision Date: 08 April 1982
• Docket Number: No. 17194,17194
• Citation: 645 P.2d 667
• Parties: TURTLE MANAGEMENT, INC., a Utah corporation, Plaintiff and Appellant, v. HAGGIS MANAGEMENT, INC., a Utah corporation, Howard W. Landa, Terrell W. Smith, Steven P. Strasser and John Landon, Defendants and Respondents, HAGGIS MANAGEMENT, INC., a Utah corporation, Counter-Plaintiff and Respondent, v. TURTLE MANAGEMENT, INC., a Utah corporation, Counter-Defendant and Appellant.
• Court: Utah Supreme Court

Page 667

645 P.2d 667

TURTLE MANAGEMENT, INC., a Utah corporation, Plaintiff and Appellant, v. HAGGIS MANAGEMENT, INC., a Utah corporation, Howard W.

Landa, Terrell W. Smith, Steven P. Strasser and

John Landon, Defendants and Respondents, HAGGIS MANAGEMENT, INC., a Utah corporation, Counter-Plaintiff and Respondent, v. TURTLE MANAGEMENT, INC., a Utah corporation,

Counter-Defendant and Appellant.

No. 17194.

Supreme Court of Utah.

April 8, 1982.

R. Dennis Ickes, Salt Lake City, for plaintiff and appellant.

Peter M. Ennenga, Ellen Maycock, Salt Lake City, for defendants and respondents.

DURHAM, Justice:

Turtle Management initiated this action to secure injunctive relief and damages for violation of a covenant not to compete and tortious interference with its business. On appeal, plaintiff/appellant contends the district court erred in awarding only nominal damages and in restricting the award of attorney's fees to reflect the limited relief secured: nominal damages and entry of an injunction against only one defendant, John Landon. Defendants/cross-appellants contend on appeal that all the relief secured by plaintiff was inappropriate. In addition, they claim plaintiff defaulted on the contract for sale of a business by making installment payments to the clerk of the district court pursuant to an order under Rule 67, Utah R.Civ.P. rather than making those payments to the defendants.

Haggis Management, Inc., was the management company for The Haggis, a private club which began operation in downtown Salt Lake City in 1976. During the spring of 1978, Geoffrey Meacham began negotiations with certain principals of Haggis Management, Inc., for the purchase of the assets of The Haggis by Turtle Management, Inc. Documents and records reviewed by Meacham during the negotiations revealed an average monthly gross of approximately $63,000 and indicated that the heaviest business was during the fall and winter months.

On or about July 7, 1978, four documents were executed effecting the transfer of the assets of The Haggis to Turtle Management. Howard Landa and Geoffrey Meacham, representing Haggis Management and Turtle Management respectively, executed an agreement which conveyed ownership of the assets of The Haggis to Turtle Management for a total purchase price of $350,000, effective August 1, 1978. Eighty-five thousand dollars was to be paid in cash in two installments prior to August 30, 1978, and a payment of $15,000 was to be made by Turtle Management to Haggis Management on January 2, 1979. The second and third documents executed on July 7, 1978, were a promissory note and a related security agreement from Turtle Management to Haggis Management in which Turtle Management agreed to pay the sum of $250,000 at 7% interest in monthly installments of $4,950.25 commencing September 1, 1978. The fourth document executed at that time was a "Covenant Not To Compete And Non-Competition Agreement," which was executed for the benefit of Turtle Management, Inc., by Haggis Management, Inc., through Howard Landa and individually by Howard Landa, John Landon, Terrell Smith and Steven Strasser, the officers and directors of Haggis Management, Inc. The Covenant Not To Compete was incorporated by reference into the basic sales agreement. It prohibited the named parties from participating personally or through agents in any business which competed directly or indirectly with Turtle Management as a private club. The agreement applied to Salt Lake County for 5 years and Summit County for 2 years. The agreement for the sale of the assets also provided that the cost of enforcing the agreement, including a reasonable attorney's fee, should be borne by the party in default.

During the period from November of 1978 to May of 1979, John Landon worked as a day manager at the Silver King, a private club in Park City, Utah, two days a week. Landon also provided advice on the operation of the club, including suggestions as to interior design, the ordering of equipment and supplies, and recommendation as to hiring of employees. Several former Haggis employees were employed by the Silver King and patrons of The Haggis also patronized the Silver King. Among those who patronized the Silver King were Terrell Smith and Steven Strasser.

On January 5, 1979, Turtle Management, Inc., filed this action and alleged in three counts that (1) there was a violation of the covenant not to compete, (2) defendants had tortiously damaged the business of Turtle Management by enticing employees from The Haggis to work for the Silver King, and (3) defendants had failed to pay certain accounts payable as required by the sales agreement. Turtle Management requested and received an ex parte order directing Turtle Management to pay the $15,000 owed to Haggis Management as of January 2, 1979, and each monthly payment of $4,950.25 thereafter directly to the clerk of the court, beginning with the payment due January 1, 1979. Defendants answered, denying each cause of action, and in a counterclaim alleged a default of the sales agreement and promissory note because of failure to pay the $19,950.25 due in January of 1979.

Count 3 of the complaint was withdrawn by Turtle Management at the time of the trial. At the conclusion of the plaintiff's case, on the defendants' motion, the district court dismissed counts 1 and 2 as to all defendants except John Landon. At the conclusion of the trial, the district court found that John Landon had violated the covenant not to compete and enjoined Landon from any further activity at the Silver King until August 1, 1980. Nominal damages of $1.00 were awarded in favor of the plaintiff. Defendant's counterclaim was dismissed and the funds held by the clerk of the court were ordered to be distributed to defendant Haggis Management, Inc. The district court awarded attorney's fees to the plaintiff of $500 plus $61.70 in costs, limiting the award of attorney's fees to those reasonable fees associated with securing injunctive relief against John Landon.

Turtle Management argues on appeal that since it proved a breach of the contract, it is entitled to compensatory damages for Landon's violation of the covenant not to compete. Plaintiff further contends that the court erred in not giving appropriate weight to its evidence concerning gross receipts and projected profits for the operation of The Haggis as a basis for awarding substantial damages. Plaintiff claims a loss of business and decline in gross receipts in comparison to the previous year.

In order to receive the kind of substantial damages which plaintiff claims, it must satisfy a three-part test in an action based upon a contract. First, plaintiff must establish that a legal right has been invaded. Second, plaintiff must prove to the factfinder by a preponderance of the evidence that there is a causal connection between the legal wrong suffered and the damages claimed. Gould v. Mountain States Telephone and Telegraph Co., 6 Utah 2d 187, 193, 309 P.2d 802, 805 (1957); Terry v. Panek, Utah, 631 P.2d 896, 897 (1981). Third, plaintiff must demonstrate the amount of damages with sufficient certainty to permit the factfinder to make an award, although the damages need not be proven with precision. Winsness v. M. J. Conoco Distributors, Inc., Utah, 593 P.2d 1303, 1305 (1979); 5A Corbin, Contracts, § 1022 (1964). Nominal damages are recoverable upon a breach of contract if no actual or substantial damages resulted from the breach or if the amount of damages has not been proven. Gould, 6 Utah 2d at 193, 309 P.2d at 805; Thompson v. Anderson, 107 Utah 331, 336, 153 P.2d 665, 667 (1944); 22 Am.Jur.2d Damages § 9 (1965).

It is clear from the record that the district court found that Turtle Management failed to satisfy the second step of the three-step process set out above. The district court stated at the conclusion of the trial that there was insufficient evidence to show by a preponderance of the evidence that employment of Landon at the Silver King took any clientele away from The Haggis. The district court stated in its Findings of Fact that the Silver King's patrons were comprised primarily of high-turnover tourists and approximately 1% of the total customer flow was comprised of former patrons of The Haggis. The trial court's conclusions in this regard are supported by substantial evidence in the record and will not be disturbed by this Court. Horman v. Lloyd, 28 Utah 2d 112, 499 P.2d 124 (1972).

Plaintiff's reliance on Gould, supra, to support its claim that damages cannot be denied because they are speculative is misplaced. The principle set forth in Gould is that substantial damages cannot be awarded when there is uncertainty regarding the causal connection between the wrong and the damage suffered. Gould, 6 Utah 2d at 193, 309 P.2d at 805; Terry, 631 P.2d at 897. Where plaintiff has demonstrated a legal wrong but failed to establish a causal connection between the wrong and the alleged damages, the award of...