December 22, 2008
AMTECH 1, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
ASSOCIATED HUMANE SOCIETIES, INC., A NEW JERSEY CORPORATION D/B/A ASSOCIATED HUMANE SOCIETIES OF NEW JERSEY, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3276-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 15, 2008
Before Judges Reisner, Sapp-Peterson and Alvarez.
Plaintiff, Amtech 1, Inc., appeals from the involuntary dismissal of its complaint at the end of the presentation of its case-in-chief pursuant to Rule 4:37-2(b). The court concluded that plaintiff's failure to offer any proof of damages was fatal to its claim, entitling defendant, Associated Humane Societies, Inc., to a directed verdict. We agree and affirm the involuntary dismissal of plaintiff's complaint with prejudice.
Plaintiff is a computer consulting company. In 1997, it entered into an agreement with defendant, a not-for-profit organization that receives and shelters animals. Under the agreement, plaintiff agreed to provide computer consulting services. In May 2002, the parties entered into another contract entitled "Mail List and Data Processing Services Contract." Under the terms of this contract, in consideration for mail list services that plaintiff would provide to defendant for the next seven years, defendant would pay plaintiff monthly payments of $6,000, with a 2.6 percent cost of living adjustment for each year after the first year. Plaintiff contends that the following language contained in Section IV, Paragraph 1 of the agreement is significant to this appeal:
1. This agreement can not be terminated by either party within the first 36 months.
2. Following the initial thirty-six[-]month term, Client may terminate this contract for cause as defined as complete failure to provide mail list services as set fort[h] in paragraph one of this agreement. Client will provide Vendor with thirty[-]day written notification and thirty days to remedy or cure for termination to occur.
Written notification of intent to terminate this agreement is to be sent to Notice address via certified mail 60 days prior to termination. During these 60 days, all responsibilities, terms, and conditions will remain intact.
3. In the event of early termination, both Vendor and Client agree to fully cooperate with each other both for final payments and for transfer of data.
Defendant initially made the required monthly payments until January 2004, at which time it ceased making any further payments. Plaintiff commenced a civil action against defendant, seeking to collect the monthly payments owed to it under the contract. Plaintiff alleged the payments owed totaled $405,000. Defendant denied the allegations contained in the complaint, and the matter proceeded as a bench trial before Judge Simonelli.
As part of its case-in-chief, plaintiff presented an expert, Dr. Frank Tinari, an economist. In his report, which was admitted into evidence, he opined that the damages to which plaintiff was entitled equaled $405,000, representing the remaining sixty months on the contract. Dr. Tinari testified that the present day value of the contract equaled $358,488. At the conclusion of plaintiff's case, defendant moved for a directed verdict based upon plaintiff's failure to prove its actual damages, which defendant urged was an essential element that plaintiff was required to prove in order to recover damages against it. The court permitted the parties to brief the issues.
In support of the motion, defendant argued that plaintiff failed to present any evidence related to its lost profits and that simply establishing the present value of the installment contract was insufficient to establish a prima facie case of anticipatory breach of contract. Citing Stopford v. Boonton Molding Co., 56 N.J. 169 (1970), plaintiff argued that proof of the present value of the installment contract was sufficient to establish its prima facie case of anticipatory breach.
In an oral opinion, the court agreed with defendant that plaintiff had failed to establish a prima facie case of its actual damages. The court found that the Stopford case was distinguishable because it involved an employer's decision to terminate a pension plan under which the plaintiff already held a vested contractual right to a lifetime pension. The court concluded that plaintiff's reliance upon the Stopford decision to support its claimed entitlement to the full contract price upon defendant's breach would ascribe too broad an interpretation to the Court's holding:
Plaintiff's entire argument rests upon the applicability of the Stopford holding to the present case. However, this Court finds that the Stopford case should be narrowly interpreted. In the Stopford case the parties were bound by a pension contract. The pension contract was for the life of the plaintiff. In addition, the Stopford Court concluded that the plaintiff had a vested right to the future installment of the pension plan -- payments.
In the present case, this Court finds that Plaintiffs do not have any vested rights or interest in the future installment payments. The contract between the parties was a commercial contract. The facts in this case are clearly distinguishable from a pension or employment case.
In Stopford, [Minnesota Amusement Co. v.] Larkin[, 299 F.2d 142 (8th Cir. 1962)] and Pierce [v. Tennessee Coal & R.R. Co., 173 U.S. 3, 79 S.Ct. 335, 43 L.Ed. 591 (1899)], all of the plaintiff[s] entered into lifelong contractual relations with the defendant. The amount -- the payments were firmly fixed and a . . . future damage award would not be speculative.
In the present case, the plaintiffs have failed to submit evidence establishing damages. This Court is left only to speculate on what were the actual losses that the plaintiff suffered from the breach.
The present appeal followed.
On appeal, plaintiff contends the trial court erred when it failed to apply the correct measure of damages for an anticipatory breach of a fixed term installment contract where the anticipatory breach amounts to a total breach of contract. We disagree.
We begin our analysis by first addressing our standard of review of a trial court's grant of a motion for an involuntary dismissal pursuant to Rule 4:37-2(b). Our task is to determine whether the evidence, along with its legitimate inferences, could have sustained a judgment in favor of the party opposing the motion. Polyard v. Terry, 160 N.J. Super. 497, 505 (App. Div. 1978), aff'd, 79 N.J. 547 (1979); see also Dolson v. Anastasia, 55 N.J. 2, 5 (1969); Pressler, Current N.J. Court Rules, comment 2 on R. 4:37-2(b). Neither the trial judge nor we, as a reviewing court, are concerned with the weight, worth, nature or extent of evidence, but must accept as true all the evidence supporting the party opposing the motion and accord it the benefit of all favorable inferences. Then, if reasonable minds could differ, the motion must be denied. Polyard, supra, 160 N.J. Super. at 505-06 (citing Dolson, supra, 55 N.J. at 5).
As stated in Brill v. Guardian Life Ins. Co. of Am., the issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." 142 N.J. 520, 536 (1995) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed. 2d 202, 214 (1986)). Therefore, in this case, plaintiff was entitled to present its case to the jury if the jury could have inferred the bare elements of plaintiff's claimed damages from the testimony and evidence presented.
The theory of recovery advanced by plaintiff is that defendant anticipatorily breached their agreement when it ceased making the monthly payment to plaintiff for the professional database services plaintiff provided to defendant, thereby preventing plaintiff from performing the balance of the contract. Generally, where a contract vendor, under a professional services contract, has been prevented from completing its contract, the vendor is entitled to the profit that would have been realized if performance had been completed. J.L. Davis & Associates v. Heidler, 263 N.J. Super. 264, 276 (App. Div. 1993). The vendor's damages are generally measured by the difference between the contract price and the cost of performance or production. Ibid. These damages are characterized as lost profits. Ibid. The standard for determining lost profits requires the party seeking to recover damages to show that profits were lost as a result of the contract vendee's actions. Cromartie v. Carteret Savings & Loan, 277 N.J. Super. 88, 103 (App. Div. 1994). In other words, lost profits represent the "difference between gross income and the costs or expenses which had to be expended to produce the income." Ibid.
In the present matter, plaintiff presented no evidence related to its actual losses but merely produced expert testimony calculating the present value of the contract without any adjustment in the calculation for plaintiff's costs to perform the contract. The trial court correctly distinguished the Stopford case by pointing out that there, the lost pension benefits were for services which had already been performed and required no adjustment for the cost to perform the contract. Moreover, in our view, the inclusion of language in the agreement prohibiting either party from canceling the contract during the first thirty-six months of the agreement did not create, as plaintiff urges, a guarantee of future installment payments, irrespective of whether plaintiff performed the contract.
Plaintiff contends the language in the agreement prohibiting cancellation of the contract for the first thirty-six months is analogous to "no-cut" provisions found in employment contracts that require payment of an employee's compensation even when the employee is unable to perform. We disagree. In the absence of express language, the proper measure of damages for defendant's anticipatory breach is as the Court set forth in Kehoe v. Borough of Rutherford, 56 N.J.L. 23 (Sup. Ct. 1893):
[G]enerally, when it can be determined what, according to the contract, the plaintiff would receive for that which he has done, and what profit he would have realized by doing that which, without fault, he has been prevented from doing, then these sums become the legal, as they are the just, measure of his damages. He is to lose nothing, but, on the other hand, he is to gain nothing, by the breach of the contract, except as the abrogation of a losing bargain may save him from additional loss. [Id. at 26-27.]
There is no dispute that plaintiff failed to present any evidence of its actual lost profits. As such, no reasonable jury could conclude, viewing the evidence most favorably to plaintiff, together with all favorable inferences, that plaintiff proved its lost profits. Consequently, a directed verdict at the end of the plaintiff's case was fully justified by the record.
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