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Lanfranconi v. Tidewater Oil Co.

decided: April 7, 1967.


Waterman, Moore and Hays, Circuit Judges.

Author: Moore

MOORE, Circuit Judge:

Plaintiff, Walter O. Lanfranconi, a former major and minor league baseball pitcher, entered into a partnership with Dante J. Domenichelli in 1953 to operate a service station at a strategic intersection in Barre, Vermont. They leased the station from defendant, Tidewater Oil Company (Tidewater). Although slow at the beginning, business developed through the hard work and long hours put in by the partners and by 1957 was providing plaintiff with an annual income of over $7,000.00, as indicated by his federal income tax returns. In October 1959, plaintiff and Domenichelli entered into a new lease with Tidewater covering the period from December 15, 1959 to December 14, 1963. Under the terms of the lease, Tidewater could cancel at the end of six months or one year, but after that was committed to the full term unless the lessees failed to perform certain specified functions. The lessees, on the other hand, could terminate the lease jointly at any time upon thirty days' notice.

The first year of the new lease did not turn out to be as profitable for "Dan & Walt's," as the partnership was known, as in previous years with plaintiff's share of the profits for 1960 amounting to only a little over $4,500.00. Apparently, the two partners were experiencing a certain amount of hostility towards one another, with Domenichelli becoming increasingly upset over plaintiff's devotion to other interests (e.g., his family and occasional baseball scouting assignments) to the detriment of the service station business. Domenichelli's first outward ventilation of his concerns took place in January or February of 1961, when, after a sales meeting, he indicated to certain Tidewater representatives that he would like a station for himself. A Tidewater distributor salesman, present at the meeting, testified that Domenichelli was assured that if the partnership ever broke up he would get the station. By the beginning of June of that year, matters had not improved and Tidewater's Vermont manager suggested that Domenichelli alone should send in a letter "cancelling" the lease (the manager himself denied such action, but there was sufficient evidence below to support the conclusion that he did, in fact, solicit the letter). Domenichelli sent in a letter, pre-dating it to early May under the belief that this would speed up the termination of the lease. Plaintiff was then informed of the fact that the lease was "cancelled" and was asked to sign a mutual cancellation form provided by Tidewater. Under representations by the Tidewater distributor salesman that the lease was already terminated and that Tidewater would take over the station with neither plaintiff nor Domenichelli being allowed to continue operating the station, plaintiff signed the cancellation form thereby effectively ending the lease and the partnership. In fact, of course, Domenichelli's letter had been totally ineffectual to end the lease because the joint action of the two partners was necessary to effect termination. The lease terminated on June 30, 1961 and on the next day, July 1st, Domenichelli was installed by Tidewater under a new lease to operate the station alone in total contravention of plaintiff's expectations. There was evidence that the distributor salesman, in an effort to assure Domenichelli's continued possession of the station, had actually prevented the partners from settling their differences by persuading Domenichelli not to offer to sell his share of the partnership to plaintiff.

Plaintiff instituted this action against Tidewater on the theory that the latter had wrongfully interfered with the partnership and had thus hastened both the partnership's demise and the lease's untimely cancellation, and had damaged plaintiff's well-established reputation in the community (that plaintiff was well known in the community is attested to by the fact that he had been presented with a car by the City of Barre in 1947 in recognition of his baseball exploits), all to the great financial detriment of plaintiff. Plaintiff asked for compensatory damages to cover his loss of income from July 1, 1961 until the end of the lease's natural term on December 14, 1963, his loss of partnership profits and his injured reputation in the community. Punitive damages were also requested.

After a trial during which the above facts were developed, the court instructed the jury that, if the jury found that Tidewater had wrongfully, intentionally interfered in the partnership's affairs, it could award plaintiff damages for loss of earnings, loss of his share of the partnership goodwill and damage to his reputation in the community. In addition, punitive damages could be awarded if the jury found defendant's conduct was motivated by "actual malice" which included "conduct manifesting nothing worse than reckless and wanton disregard of plaintiff's rights." The trial court did not specifically instruct the jury on Vermont partnership law, as requested by defendant, and thus failed to inform the jury that a partner can voluntarily discontinue a partnership at any time.

The jury returned a verdict of $55,000 -- $20,000 in compensatory damages and $35,000 for exemplary damages. Tidewater's post-trial motions for judgment N.O.V., new trial or remittitur were denied and this appeal followed. We find the verdict to be grossly excessive, without basis on the record, with respect to both categories of damages. However, because we believe the jury could have reasonably found that plaintiff was injured by the wrongful conduct of defendant, we, in the interests of judicial expediency, will affirm upon the condition that plaintiff remit all but $7,500 compensatory and $5,000 punitive damages, leaving him a total verdict of $12,500. Should plaintiff not accept this condition within thirty days from the filing of this opinion, the judgment of the district court is reversed and the cause remanded for a new trial.

The Jury's Verdict

Any doubt that this Court has the power to review a trial court's exercise of discretion in refusing to set aside a jury verdict as excessive was dispelled by Dagnello v. Long Island RR., 289 F.2d 797, 798-806 (2d Cir. 1961), a case in which the excessiveness of the verdict was the only issue. However, where as here, the trial court in addition to allowing an excessive verdict to stand, in our opinion, improperly submitted a defamation issue to the jury upon which there was absence of proof, the jury award must be vacated.

The evidence adduced at trial is clearly insufficient to support an award of $20,000 in compensatory damages. There was evidence that plaintiff suffered some loss of earnings and that but for Tidewater's interference he might have realized more from the disposition of his share of the inventory and accounts receivable than he actually received in the eventual settlement worked out with Domenichelli. Each item of damages will be examined.

Loss of earnings : Plaintiff testified at trial that following his ouster on June 30, 1961, he was unemployed for some three months, worked as a camp supervisor at $60 per week for three weeks, after a short layoff spent eleven months as a bowling instructor at an average of $65 per week, and finally took over a Mobil Oil Company service station which netted him an average of $90 per week over the remainder of the relevant period. A rough calculation based on these figures yields total earnings of about $9,000 during the period from July 1, 1961 to December 14, 1963, the termination date of the lease and the first date at which Tidewater could have legally forced plaintiff out of the Dan & Walt's station.

Plaintiff's earnings from his partnership with Domenichelli for the five and one-half years prior to the lease cancellation, as indicated by his federal tax returns, were as follows: 1956 -- $4,994; 1957 -- $8,046; 1958 -- $7,392; 1959 -- $7,067; 1960 -- $4,529; first 6 months of 1961 -- $3,154. Plaintiff's average annual earnings for that period work out to be slightly under $6,400. Projecting that average over the just under two and one-half years remaining under the lease, plaintiff might reasonably have expected earnings totalling $16,000, whereas in fact he earned about $9,000. By his own testimony, therefore, plaintiff's loss of earnings amounted to roughly $7,000.

Loss of appropriate share of inventory : Upon termination of the partnership on June 30, 1961, the inventory was evaluated at $6,228, the partnership debts were paid and the accounts receivable were transferred to Domenichelli. Plaintiff participated in these determinations through his counsel and an accountant and accepted a cash payment of $2,600 as full satisfaction of his share of the partnership. Plaintiff now contends in this suit against Tidewater that $2,600 was woefully inadequate as compensation for a half interest in the partnership as a going concern. At trial, when asked by his counsel to estimate the value of the inventory of materials and supplies at the time business ceased, plaintiff first answered, "I don't know, I can't say," but, when pressed, estimated a value "between $10,000 and $15,000." At the end of his direct testimony, plaintiff estimated that the fair market value of his half-interest in the service station on June 30, 1961 was $10,000, although he admitted he had offered to sell his share to Domenichelli for $7,500. On the other hand, Domenichelli testified that the value of each partner's share in the business was $3,500 in June, 1961, this figure being based on the value of the partnership's equipment and cash. Domenichelli had offered that June to sell his share to plaintiff or to buy plaintiff's share for $3,500, but withdrew the offer upon the urgings of a Tidewater representative, who wanted Domenichelli to retain control of the station at all costs.

Plaintiff's estimate that his share of the business was worth $10,000 was based on the worth of the partnership as a going concern and was thus probably not limited to his share of the tangible assets, but included a share of the goodwill. But because plaintiff cannot recover compensation for loss of goodwill in this suit, as will be explained below, the inventory and other tangible assets must be evaluated alone. The best evidence of the value of the inventory is the bill of sale introduced below showing that plaintiff released his interest in the inventory for a payment of $6,228 by Domenichelli to the partnership account. After payment of partnership debts and a settlement of accounts receivable, plaintiff netted $2,600. Whereas there is little basis for finding that $2,600 was an unreasonable settlement, it is possible that but for Tidewater's interference, plaintiff might ...

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