FILED

August 17, 1998

Cecil Crowson, Jr.

Appellate C ourt Clerk

 IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

JERRY W. RAGON and JERRY ) C/A NO. 03A01-9711-CH-00499

LEBRON RAGON, a Partne rship ) 

d/b/a ACTION LINEN SERVICE, ) HAMILTON CHANCERY

)

Plaintiffs-Appellees, ) HON. R. VANN OWENS,

) CHANCELLOR

v. )

) AFFIRMED IN PART,

O’CHARLEY’S, INC., ) REVERSED IN PART,

) AND REMANDED FOR A NEW TRIAL

Defendant-Appellant. ) ON THE ISSUE OF DAMAGES

ROBERT D. BRADSHAW and B. STEWART JENKINS, JENKINS &

BRADSHAW, P.C., Chattanooga, for Plaintiffs-Appellees.

JOHN G. JACKSON, CHAMBLISS, BAHNER & STOPHEL, Chattanooga, for

Defendant-Appellant.

O P I N I O N

Franks, J.

In this breach of contract action for damages, the jury returned special

verdicts in plaintiffs’ favor, and the Chancellor entered a judgment for damages

against defendant. Defendant has appealed. The issues on appeal raised by

defendants are:

I. Whether the Chancellor erred in not sustaining O’Charley’s

objection to defective verdict, or in the alternative in not granting

a new trial, as the jury’s verdict was inconsistent and contrary to

the manifest weight of the evidence?
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Plaintiffs subsequently entered into a written contract executed by the manager with the

Dalton restaurant.

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II. Whethe r in the alternative, the Chancellor erred in refusing to

suggest a remittitur, as the jury’s award of damages was

excessive and contrary to the manifest weight of the evidence?

III. Whether the Chancellor erred in failing to grant O’Charley’s

motion in limine, and/or for directed verdict on the alleged

Hixson contract. As the proof clearly showed, the plaintiff

destroyed and rescinded a copy of the alleged contract with the

intent to release O’Charley’s from any obligation it may have had

under the a lleged contract?

The focal point of this dispute is a contract for linen service entered between plaintiffs

and defendant’s kitchen manager, Jason Giacchi, at the Hixson restaurant. Plaintiff

had begun providing linen service to defendant’s Dalton restaurant in 1993. The

original contract with the Dalton restaurant was an oral agreement1

 with the kitchen

manager to supply linens. 

Plaintiff Jerry Ragon testified that he first contacted the general manager

of the “Shallowford Drive” restaurant in Chattanooga, Jerry Madden, about providing

linen service to O’Charley’s restaurants. Madden advised that he was under a contract

with another service, but informed of the opening of the Dalton restaurant. Madden

referred Ragon to Alan Goins who would be the manager of the Dalton restaurant, and

plaintiffs entered into an oral agreement to provide linen service for the Dalton outlet. 

Subsequently, Madden advised that defendant had purchased the Black Eyed Pea

restaurant in Hixson and was converting it to an O’Cha rley’s. Madden told plaintiff to

contact Wes Wilkerson, who would be the gene ral manager of the Hixson restaurant,

about supplying linen services. Plaintiff went to the Hixson restaurant where

construction was underway, and approached Wilkerson about providing linen service. 

Wilkerson told him to talk to Jason Giacchi who was the kitchen manager and handled

the linen for the restaurant. Plaintiff spoke with Giacchi and discussed the type of
3

service needed, and they negotiated a contract for linen service. Plaintiff explained

that he wanted a written contract because the Hixson restaurant needed uniforms

supplied, which plaintiffs would have to purchase, as well as the increased volume

would require additional equipment to service that volume. 

A boiler plate contract was furnished Giacchi who filled it out with the

aid of plaintiff, and Gia cchi signed as kitchen manager and Ragon a lso signed. 

Giacchi retained the original and Ragon the copy. Subsequently, plaintiff was called

by Alan Goins at the Shallowford restaurant, who advised that his linen contract was

up with the other company, and plaintiff entered into an oral agreement to provide

linen service for the Shallowford restaurant. He explained that a written contract was

not needed, since he was only supplying linens, and that plaintiff had an adequate

inventory to servic e this restaurant. 

Plaintiff testified that on January 8, 1996, plaintiffs went to the Hixson

store on a regular service call and was advised by the manager that he had a new linen

company, and that “I needed to gather my stuff and get out of the store”. He denied

that he had received any complaints about the quality of his service prior to the abrupt

termination.

In the specia l interrogatories submitted to the jury, the jury was asked if

Giacchi had “actual authority” to execute the contract, to which the jury responded in

the negative. The jury was also queried as to whether Giacchi had “apparent

authority” to execute the contract. The jury responded affirmatively, and the Trial

Judge approved this verdict.

Defendant contends under the first issue that these findings are

inconsistent, and argues that there was no evidence that defendant had ever allowed a

kitchen manage r to sign such contracts, there was no evidence that kitchen managers

had theretofore signed such contracts, and no proof was offered that plaintiff had ever
4

been told that kitchen managers could sign such contracts. These findings are not

inconsistent, but contrast the distinction between actual and apparent authority. Our

Supreme Court gave this explanation in O’Shea v. First Fed. Savings, etc., 218 Tenn.

619-624 (1966), and said:

It is further the settled law of this State that a general agent is authorized

to act within the apparent scope of his authority, though this may be

different from his actual powe rs; that is to say, an agent may bind his

principals by acts within the general scope of his apparent authority,

notwithstanding the use of powers in excess of authority actually given

by the principal.

Accordingly, the lack of evidence of actual authority does not necessarily def eat a

finding of apparent authority.

The issue thus becomes whether the re is material evidence to support

the jury’s verdict. We are only authorized to set aside a jury verdict if there is no

materia l evidence to support it. T.R.A.P. Rule 13(d). 

In addition to the foregoing, plaintiffs offered the te stimony of Darryl

MacConkey, who had served as the first assistant manager at the Hixson restaurant. 

He testified that he had never heard of plaintiff when he went to work at the Hixson

store, but was told by Giacchi that plaintiff was providing the linen service. He

further testified:

Q. Did you at some point in time see written proof that Action Linen

Service would be the provider of the linen service there?

A. Yes, I did.

Q. What did you see?

A. I saw a contract from Action Linen.

Q. Did you have occasion to look at the contract and see who had

signed it?

A. I glanced at it, but I was in the process of filing a lot of

warranties and stuff, trying to get the office put together.

Q. Now explain that to us. How did you come about filing
2

There is material evidence that a manager had “actual” authority to enter such contracts.

5

warranties, etc.?

A. Wes Wilkerson was the gene ral manager and he had Shelly Perry

and myself filing all the warranties on the equipment in the

kitchen that fall in my domain as being a first assistant, so we

were filing them away.

Q. And you had occasion to file the document that you’ve . 

A. Yes.

Q. You’ve . . . referred to.

A. Yes.

A good statement of what the plaintiff is required to show to establish

the apparent authority of the agent is set forth in 3 Am.Jur.2d Agency §80, p.587:

In order to establish that an agent had the apparent authority to do the

act in question, it must be established (1) that the principal has

manifested his consent to the exercise of such authority or has

knowingly permitted the agent to assume the exe rcise of such authority,

(2) that the third person knew of the facts and, acting in good faith, had

reason to believe, and did actually believe, that the agent possessed such

authority, and (3) that the third person, relying on such appearance of

authority, has changed his position and will be injured or suffe r loss if

the act done or transaction executed by the agent does not bind the

principal.

Accord: Rich Printing Co. v. McKellar’s Estate, 46 Tenn. 444, 478-9 (1959). We

conclude there is material evidence to support this verdict. The trier of fact could

reasonably infer that the manager2 had knowingly permitted the agent to enter into the

contract from the foregoing evidence. Evidence that an agent who acts with the

knowledge and approval of his principal is circumstantial evidence of what the agent

was authorized to do. Boillin-Harrison Co. V. Lewis & Co., 182 Tenn. 342, 187

S.W.2d 17. Rich Printing Co.

We find the first issue to be without merit.

The jury’s verdict approved by the Trial Judge was for $52,960.00 as
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liquidated damages for breach of the Hixson restaurant contract, and unliquidated

damages of $33,000.00 for the breach of the Dalton restaurant contract. 

Defendant’s second issue questions the propriety of the damages

awarded, on two bases. It asserts that the $33,000.00 award of actual damages for the

breach of the Dalton contract “is contrary to the manifest weight of the evidence” and

that there is no evidence to support the jury’s finding of liquidated damages for the

breach of the Hixson contract. 

We aga in observe that our review is not to weigh the evidence, but to

determine if there is ma terial evidenc e to support the jury’s finding. T.R.A.P. Rule

13(d). Under the evidence, the liquidated damage clause in the Dalton contract set

damages at $44,798.20. The jury, in answer to questions, concluded as to this contract

amounted to an unenforceable penalty, and found ac tual damages to be $33,000.00. 

However, as to the Hixson contract, the jury found that the damages calculated by the

liquidated damage clause was reasonable and not a penalty. It then found that the

liquidated damage clause was enforceable, and set the liquidated damages as

heretofore noted. The provision for liquidated damages in the Hixson and Dalton

contracts state:

The parties agree that in the event of any termination of service by the

customer in breach of this contrac t, the supplier shall be entitled to

liquidated damages in the amount equal to forty (40%) percent of the

average weekly fees charged for services hereunder prior to the date of

termination, multiplied by the number of weeks remaining in the

unexpired term of this contract. Said liquidation is not a penalty, but is

intended to compensate the supplier for expenses which would have

been absorbed and profit which would have been generated by the

customer’s fulfillment of its obligation under this contract.

Defendant contends that the liquidated damages awarded by the jury

under the Hixson contract is “grossly in excess of actual damages”. The Supreme

Court in V.L. Nicholson Co. v. Transcon Inv ., 595 S.W.2d 474, 484 (Tenn. 1980),

explained why and when liquidated damages are appropriate:
7

The term “liquidated damages” means a sum stipulated and agreed upon

by the parties at the time they enter their contract, to be paid to

compensate for injuries, should a breach occur. 22 Am.Jur Damages

212, 1965. See Railroad v. Cabinet Co., 104 Tenn. 568, 58

Southwestern 303 (1900). The reason for allowing parties to stipulate

the amount of damages is to crea te certainty whe re damages are likely to

be unc ertain and not ea sily proven. Railroad v. Cabinet Co., supra. The

amount stipulated should be reasonable in relation to the terms of the

contract and the certainty with which damages c an be measured; there

must exist a reasonable relationship between the amount and what might

reasonably be expected in the event of a breach. Id. If the provision is a

reasonable estimate of the damages that would occur from a breach, then

the provision is normally construed as an enforceable stipulation for

liquidated damages.

The evidence establishes that damages for breach of contracts of this

nature are not easily established. Plaintiff testified to inventory investment in excess

of $10,000.00, and included 40% of the cost for equipment, van, overhead, including

insurance, license, rent and anticipated profits as elements of damages. He was of the

opinion that his losses for breach of the contract exceeded the stipulated liquidated

damages. In his analysis, he did the same cost scenario for the Dalton contract, and

offered an opinion that his losses for that brea ch were slightly in excess of $40,000.00. 

While plaintiff was permitted to offer his opinion of damages without

objection, there is no material evidence to support a finding that plaintiff’s actual

damages bore a reasonable relationship to the stipulated damages in the contracts. 

The evidence does not establish that plaintiff’s opinion of his losses is based on

accurate analysis derived from sound cost accounting principles. Accordingly, we set

aside the jury verdict on the amount of damages, and award a new trial on the issue of

actual damages for breach of these contracts. 

Prior to trial, defendant had withdrawn its defense of the

unreasonableness of the liquidated damage clauses, but took the position at trial that it

intended to argue that liquidated damages were not the proper measure of damages

under the contracts. The Trial Judge agreed to this procedure after the parties agreed
3

After withdrawing the affirmative defense, defendant essentially raised it again during trial.

8

that the plaintiff could, after the defendant’s proof, offer evidence of his damages. It

is clear the plaintiff suffered damages, but it is also clear that he was not prepared to

offer evidence on the issue of actual damages. Because of the procedural tactics3 of

defendant and our dissatisfaction with the sufficiency of the evidence on the issue of

actual damages, we remand for a new trial on the issue of actual damages, for the

breach of both contracts. On remand, plaintiff will be entitled to offer proof of

damages in the nature of reasonable expenses made in preparation for performing

these contracts. See 22 Am.Jur.2d Damages §596, and profits lost as a result of the

breach of the contract. Plaintiff will be required to establish his lost profits to a

reasonable degree of certainty, but since prospective profits are to some extent

uncertain and problematical, uncertainty as to the amount of profits that would have

been realized, will not prevent a recovery. 22 Am.Jur.2d Damages §625, p. 686.

Finally, defendant argues that it should have been granted a directed

verdict on the Hixson contract because the proof established that plaintiff had

destroyed and rescinded the contract with the intent of releasing defendant from any

obligations under the contract. We do not agree. Plaintiff testified that he advised

defendant’s agents that he would “tear up” the Hixson contract if defendant would

honor the other two contracts with their outlets. He further testified that the agent had

indicated that plaintiff would lose the other business if he attempted to enforce the

Hixson contract. However, after that conversation, plaintiff also lost the other

contracts within a short time. Under these circumstances, there was material evidence

to support the jury’s finding that there was no meeting of the minds on a

“cancellation” of the Hixson contract.

We affirm the judgment of the Trial Court in part and reverse in part,
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and remand for a new trial on the issue of damages for breach of the contracts.

The cost of the appe al is assessed one-half to plaintiffs and one-half to

defendant.

__________________________

Herschel P. Franks, J.

CONCUR:

___________________________

Charles D. Susano, Jr., J.

___________________________

William H. Inman, Sr.J.