Case Title: Clark v. Scott

Citation: 

Docket Number: 982377

State: virginia

Court: Virginia Supreme Court

Date: 1999-09-17T00:00:00Z

Document:
Present:  All the Justices 
 
C. BENSON CLARK, ET AL. 
 
v.  Record No. 982377   OPINION BY JUSTICE BARBARA MILANO KEENAN 
 
 
 
September 17, 1999 
ANNETTE E. SCOTT 
 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Thomas S. Kenny, Judge 
 
 
 
In this appeal from a decree providing an accounting in the 
dissolution of a partnership, we consider whether the evidence 
supports the chancellor's award of damages, which was for an 
amount less than that recommended by a commissioner in chancery. 
 
In 1988, Dr. C. Benson Clark and Dr. Annette E. Scott 
formed a partnership known as Clark and Scott Dental Associates 
(the partnership).  They entered into a written agreement (the 
partnership agreement) under the terms of which they shared the 
expenses of operating a dental practice in an office condominium 
in Fairfax County.  Clark owned the office condominium and 
leased it to the partnership.  As part of the partnership 
agreement, the partners agreed to "exert their best endeavors 
and skills for the interest, profit and advantages of the 
partnership." 
 
At the time they formed the partnership, Clark had been a 
dentist for about 19 years, and Scott had been a dentist for 
three years.  Clark also maintained separate dental practices 
with other partners in Newport News and Chesapeake. 
 
Scott engaged in the general practice of dentistry, while 
Clark specialized in providing dental implants and other forms 
of reconstructive surgery.  Clark and Scott orally agreed that 
Scott would refer patients to Clark for surgery, and Clark would 
refer patients to Scott for general dentistry.  Clark planned to 
treat patients in the partnership's office for no more than five 
days per month, while Scott worked there on a full-time basis.  
Under the terms of the partnership agreement, Scott was 
responsible for the day-to-day management of the dental 
practice. 
 
The partnership began operating in April 1989.  In June 
1990, Clark filed a bill of complaint in the trial court seeking 
dissolution of the partnership and payment from Scott of sums 
allegedly due Clark under the partnership agreement.  Clark 
alleged in the bill of complaint that the relationship between 
the partners began to deteriorate in January 1990, and that the 
partners' "ability to maintain a working business relationship 
has evaporated." 
 
In February 1991, Clark filed a warrant in debt in the 
general district court alleging that Scott owed him rent under 
the office lease.  On Scott's motion, the general district court 
removed the warrant in debt to the circuit court. 
 
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When Scott vacated the partnership's office in June 1991, 
she removed equipment, furniture, and supplies belonging to the 
partnership.  Clark filed a second bill of complaint in the 
circuit court, requesting return of the partnership's property, 
as well as an award of damages allegedly caused by Scott's 
removal of the property.  The chancellor entered a permanent 
injunction, requiring Scott to return the equipment and 
reserving Clark's damage claim for later determination. 
 
The chancellor entered orders consolidating the three cases 
and referred the matter to a commissioner in chancery.  The 
chancellor directed the commissioner to consider whether the 
partnership should be dissolved and to determine the status of 
the accounts between the partners.  The chancellor also asked 
the commissioner to determine whether the partnership had 
breached the office lease by failing to pay rent and, if so, the 
amount of damages due Clark under the lease.  Finally, the 
chancellor directed the commissioner to determine whether and to 
what extent Scott's removal of partnership property from the 
office had caused Clark damage. 
 
At an ore tenus hearing before the commissioner, Clark 
testified that on one Saturday in January 1990, he arrived at 
the partnership office to treat some patients and found that the 
lock on the outer door had been changed.  He stated that he was 
unable to enter the office, and explained that this was the 
 
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first time he was aware of a problem concerning the partnership.  
Soon thereafter, a receptionist in the office informed him that 
Scott had instructed the office staff not to make any more 
appointments for him.  Clark testified that he contacted his 
attorney, who advised him that he did not have the right to 
enter the office forcibly.  Clark stated that the lack of access 
to the office was one reason he did not attempt to return there, 
and also explained that he and Scott "were not communicating," 
that Scott was "generally uncooperative," and that their 
business relationship had "deteriorated to a point that it was 
just uncomfortable." 
 
Clark testified that he lost about $75,000 in income as a 
result of not being able to use the office between January 1990 
and July 1991.  He estimated that in November and December 1989, 
he treated "[p]robably three [patients]" there each month and 
earned about $4,500 per month. 
 
In March 1991, Clark acquired a new partner who began 
treating patients in the partnership office prior to Scott's 
departure in June 1991.  Clark testified that within one year of 
starting his dental practice with the new partner, Clark was 
earning about $18,000 per month based on surgeries he performed 
two days per month. 
 
Scott testified that beginning in the summer of 1989, she 
referred "very few" patients to Clark because she "did not have 
 
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any faith or confidence" in the quality of the treatment he 
provided to his patients.  She explained that her business 
relationship with Clark was strained further in the fall of 1989 
when she disagreed with the accounting procedures he used to 
monitor each partner's contributions to the partnership 
expenses. 
 
Scott testified that she did not remember changing the lock 
on the outer door of the office in January 1990.  She explained 
that she changed the lock in April 1990 for security reasons, 
and that a key was available for Clark's use but that she did 
not know if he ever asked for or obtained the key. 
 
Scott admitted that when she left the partnership office in 
June 1991, she removed some equipment belonging to the 
partnership.  She stated that she was concerned about her 
personal liability for repayment of the loan that the 
partnership had obtained to purchase the equipment. 
 
In his report to the court, the commissioner found that 
Scott denied Clark access to the partnership's office, from 
January 15, 1990 to March 15, 1991, with the intent to terminate 
the partnership.  The commissioner concluded that Clark 
sustained a loss of profits from business income as a result of 
Scott's actions.  To determine the amount of lost profit damages 
Clark sustained each month during this time period, the 
commissioner used the $4,500 amount that Clark testified he 
 
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earned in both November and December 1989, and deducted from 
that amount Clark's share of the monthly partnership expenses.  
The commissioner found that Clark would have made a profit of 
$2,438 per month during these 14 months, and recommended a 
damage award of $34,132 for profits lost during that period. 
 
The commissioner also determined that Clark had paid 
partnership expenses from January 1990 to March 1991.  Finding 
that Clark received no benefit from these payments because of 
the "lockout," the commissioner recommended that Scott reimburse 
Clark the sum of $19,612 for those partnership expense payments. 
 
The commissioner concluded that under the terms of the 
lease, Clark, as the owner of the leased premises, was entitled 
to reimbursement of his attorney's fees incurred as a result of 
the partnership's breach of the lease.  Noting that Scott had 
conceded that "at least some rent" had not been paid, the 
commissioner recommended that Scott pay $3,000 for Clark's 
attorney's fees related to the partnership's breach of the 
lease. 
 
Finally, the commissioner found that during 1989, Clark 
overpaid the sum of $16,763.74 for expenses due under the terms 
of the partnership agreement, and recommended that Scott 
reimburse Clark this amount.  Based on these findings, the 
commissioner recommended that the trial court enter judgment in 
Clark's favor in the total amount of $73,507.74. 
 
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Scott filed exceptions to the commissioner's report, 
arguing that the evidence failed to support the commissioner's 
finding that Scott denied Clark access to the office with the 
intent to terminate the partnership.  Scott also asserted that 
the commissioner improperly based his recommendation of damages 
for Clark's loss of business profits on speculative evidence. 
 
The chancellor held that the evidence did not support the 
commissioner's finding that Scott denied Clark access to the 
office.  Thus, the chancellor rejected the commissioner's 
recommendations for damages incurred during the "lockout" 
period, namely, the $19,612 sum that Clark paid for partnership 
expenses, and the $34,132 sum for Clark's lost profits. 
 
Finally, the chancellor concluded that the lease was a 
partnership obligation, and that the evidence did not support a 
conclusion that Scott was solely responsible for breach of the 
lease.  Therefore, the chancellor allowed Clark only one half 
the $3,000 in attorney's fees recommended by the commissioner.  
The chancellor confirmed the commissioner's finding that Scott 
owed Clark $16,763.74 for Clark's overpayment of partnership 
expenses in 1989, and entered final judgment for Clark in the 
total amount of $18,263.74.  Clark appeals from this judgment. 
 
The standard of review that we apply on appeal is well 
established.  In equity suits in which the chancellor has set 
aside some of the commissioner's findings, we examine the 
 
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evidence to determine whether, under a correct application of 
the law, the evidence supports the findings of the commissioner 
or the conclusions of the trial court.  Carter v. County of 
Hanover, 255 Va. 160, 166-67, 496 S.E.2d 42, 45 (1998); Orgain 
v. Butler, 255 Va. 129, 132, 496 S.E.2d 433, 435 (1998); Hill v. 
Hill, 227 Va. 569, 577, 318 S.E.2d 292, 296-97 (1984).  In doing 
so, we give due regard to the commissioner's findings on those 
subjects that particularly depend on the commissioner's ability 
to see, hear, and evaluate the testimony of the witnesses.  
Carter, 255 Va. at 167, 496 S.E.2d at 45; Hurd v. Watkins, 238 
Va. 643, 646, 385 S.E.2d 878, 880 (1989); Hill, 227 Va. at 577, 
318 S.E.2d at 297. 
 
Clark argues that the evidence supports the commissioner's 
finding that Scott unilaterally breached the partnership 
agreement by denying Clark access to the partnership office from 
January 1990 to March 1991.  In response, Scott asserts that the 
evidence showed that the partners' business relationship 
deteriorated over a period of time, and that Clark made no 
effort to continue the partnership. 
 
The commissioner accepted Clark's version of the events 
that transpired during this time period while the chancellor did 
not.  Our review of the record reveals that the evidence 
reasonably supports either conclusion.  Since resolution of this 
factual dispute rests strongly on the credibility of the 
 
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witnesses, we must defer to the commissioner's ability to 
evaluate the testimony and evidence given in his presence.  Id.  
Thus, we will reverse the chancellor's holding rejecting the 
commissioner's finding that Scott breached the partnership 
agreement by denying Clark access to the office. 
 
This finding, that Scott denied Clark use of the 
partnership's office, was the basis for the commissioner's 
recommendation that Scott pay Clark $19,612 for partnership 
expense payments he made during the period he was excluded from 
the office.  Scott did not contest the commissioner's finding 
that Clark paid that amount for partnership expenses related to 
the conduct of the partnership's business.  Based on this 
uncontested finding, which is supported by the evidence, we will 
reverse the chancellor's determination denying Clark 
reimbursement of that amount. 
 
Clark next argues that the evidence supports the 
commissioner's finding that he sustained $34,132 in lost profits 
during the "lockout" period.  In response, Scott contends that 
even accepting the commissioner's determination that she denied 
Clark access to the office, Clark failed as a matter of law to 
prove this portion of his damage claim.  We agree with Scott. 
 
While a plaintiff claiming lost profits from a business is 
not required to prove damages with mathematical precision, the 
plaintiff must produce sufficient evidence to permit the trier 
 
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of fact to estimate these damages with reasonable certainty.  
TechDyn Sys. Corp. v. Whittaker Corp., 245 Va. 291, 298, 427 
S.E.2d 334, 339 (1993); Goldstein v. Kaestner, 243 Va. 169, 173, 
413 S.E.2d 347, 349 (1992); ADC Fairways Corp. v. Johnmark 
Constr., Inc., 231 Va. 312, 318, 343 S.E.2d 90, 93 (1986).  When 
an established business, with a proven earning capacity, is 
interrupted, the prior and subsequent record of the business' 
profits may be used to permit an intelligent and probable 
estimate of damages during a period at issue.  Commercial Bus. 
Sys., Inc. v. BellSouth Servs., Inc., 249 Va. 39, 50, 453 S.E.2d 
261, 268 (1995); Mullen v. Brantley, 213 Va. 765, 768-69, 195 
S.E.2d 696, 699-700 (1973).  See ITT Hartford Group, Inc. v. 
Virginia Fin. Assoc., Inc., 258 Va. ___, ___, ___ S.E.2d ___, 
___ (1999) decided today.  However, since a new business is a 
speculative venture whose success depends on a multitude of 
contingencies, evidence of that business' initial profits does 
not provide the required safeguards permitting a reasonably 
certain estimate of damages for the purpose of proving lost 
profits.  Id.
 
Here, the evidence is undisputed that the partnership's 
dental practice began in April 1989 and was in operation for 
only eight months when Scott breached the partnership agreement.  
The evidence also established that the partnership's business 
was "very light" in the early months of the practice and did not 
 
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begin to be "busy" until November or December 1989, just prior 
to Scott's breach in January 1990. 
 
This record fails to disclose evidence reasonably 
supporting a conclusion that the partnership's dental practice 
achieved the status of an established business by January 1990.  
Therefore, since the partnership's dental practice was a new 
enterprise lacking an established earning capacity, the evidence 
does not permit a reasonably certain estimate that Clark's 
earnings in November and December 1989 were a reliable indicator 
of the amount he would have earned between January 1990 and 
March 1991.  See Mullen, 213 Va. at 768-69, 195 S.E.2d at 699-
700. 
 
Clark's testimony regarding his earnings from his later 
partnership with a new partner also does not provide a basis for 
an intelligent and probable estimate of the profits he would 
have earned from his partnership with Scott.  Clark testified 
that this later partnership was a completely new and separate 
undertaking that did not involve patients from his prior 
partnership with Scott.  Thus, since the evidence is 
insufficient as a matter of law to support the commissioner's 
recommendation that Clark be awarded $34,132 in lost profits, we 
will affirm the part of the chancellor's judgment rejecting this 
recommendation. 
 
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Finally, Clark argues that the chancellor erred in awarding 
him only half the attorney's fees recommended by the 
commissioner.  We find no merit in this argument.  As the 
chancellor correctly noted, attorney's fees were allowable only 
under the terms of the lease between Clark and the partnership.  
Clark failed to prove that Scott was solely responsible for the 
partnership's failure to make all the payments due under the 
lease agreement.  Thus, we will affirm that part of the judgment 
awarding Clark, as lessor of the office condominium, one half 
the attorney's fees attributable to his enforcement of the lease 
agreement against the partnership. 
 
In summary, we hold that the evidence supports the 
following awards in Clark's favor:  1) $16,763.74 for his 
overpayment of partnership expenses in 1989; 2) $19,612 for 
Clark's payment of partnership expenses during the "lockout" 
period; and 3) $1,500 in attorney's fees for the partnership's 
breach of the lease agreement.  Therefore, we will affirm in 
part, and reverse in part, the chancellor's judgment and enter 
final judgment in favor of Clark in the total amount of 
$37,875.74. 
Affirmed in part, 
reversed in part, 
and final judgment.
 
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