# FILED Dec. 3, 1996 Cecil Crowson, Jr . Appellate Court Clerk IN THE COURT

OF APPEA LS OF TEN NESSEE WESTER N SECTION AT J ACKSON

______________________________________________________________________________ RAINBO BAKING COMPAN Y OF Shelby Chancery No. 101675-3 LOUISVILLE, a Delaware Corporation, C.A. No. 02A0 1-9510-CH-002

23 Plaintiff, Hon. D. J. Aliss andratos v. RELEASE COATIN GS OF TENNESSE E, INC., Defe nda nt. ROBERT L. CRAW FORD and JONATHA N LAKEY, Wya tt , Tarr ant & Combs, Memphis, Attorneys fo r Plaintiff. KAR EN R . CI CALA , Me mph is, A ttorne y for Defe nda nt. MODIFIED AND AFFIRMED Opinion filed:

______________________________________________________________________________ TOMLIN, Sr. J. Rainbo Baking Company of Louisville (“Rainbo”) filed suit in the Chancery Court of Shelby County against Release Coatings of Tennessee, Inc. (“Relea se”) seeking compensatory damages from Release for damages allegedly sustained by Rainbo as a result of the improper straightening of a large quantity of ba king pans used by it in its ba

kery busi ness. The

suit conta

ined a co unt in negl

igence a nd a coun t in breach of contract. Release f iled a counter-claim seeking to recover f rom Rainbo the balance due it for work performed. Following a benc h trial, the court issued an opinion from the bench. In this opinion the court found that upon the evidence prese nted, Release was liable to Rainbo. However, the court spec ifically stated that it did not find that Rainbo had carried its burden of proof as to damages. The court ordered a refer ence to t he Maste r to give Ra

inbo an op

portunity to prese nt addition al proof

as to damages , with Rele ase bein g given an opportuni

ty to pres ent count

ervailin g proof if desired . Following

the Maste

r’s hea ring, a r eport wa s submitted

to the cha

ncellor in which the value of Rainbo’s pans was stated. The Master’ s report was affirmed and judgment entered thereon in favor of Rainbo. The chancellor dismissed the counterclaim of Release against Rainbo. Release has raised three issues on appeal: did the2

chancellor err in: (1) awarding a judgment against Release when Rainbo failed to prove its case; (2) the manner of determining the amount of damage s sustained by Rainbo; and (3) failing to find for Release on its counter-claim. For the re asons hereinafter stated, we modify and affirm the trial court. Most if not all of the facts are not in dispute. Rainbo, a multi-state baking company, producing as one of its principal products loaves of brea ds, entered into an oral contract with Release, through David Long, Release’ s owner and president. The agreement called for Release to cle an, reglaze and straighten one thousand two hundred and seventy-eight (1,278) one and a half pound King Pullman baking pans and four hundred and thirty-two (432) one-pound bread pans. At the time this agreement was made, David Long requested of Charles Jackson, the director of manufacturing at Rainbo, that he be provided two of the best pans that Rainbo had in its possession for Release to use as a sample, from which dies would be made f or the straightening of the one and a half pound baking pans. Jackson removed two of the pans from Rainbo’s production line and gave them to Long, advising him that all of the pans were in about the same shape. At that time, unbeknownst to Jackson, Rainbo held in its possession several new pans which were not off ered to Release. The pans were delivered by Rainbo to Release f or straightening. After the job was completed Release returned the pans to Rainbo. A short while ther eafter Rainbo contacted Release, advising it that Rainbo was having difficulty with the pans sticking together when stacked, as well as being unable to plac e the same number of loaves of baked br ead on the

bread tr ays as before. O fficial s of Relea se trave led to Loui sville and met with representatives of Rainbo. Release offe red to rework the pans a second time. A representative of Release inquired of Rainbo if ther e were any new pans available that might be used as a pattern for a new die . Rainbo advised that such a pan was available and presented it to Release. The pans were reworked a second time and returned by Release to Rainbo. A few months thereafter Rainbo contends that pin holes and small crac ks begin to appear3

in the pans. Discussions followed between the parties wherein Rainbo conte nded that the pans had been improperly straightened by Release a nd were thus rendered unsatisfactory for use in its baking operations. Release denied it had ca used any damages to Rainbo. At this time, Rainbo owed Release a balance of four thousa nd one seventy-nine dollars and six cents ($4,179.06) on its agreement. The pa rties were unable to resolve their differences and this litigation followed. This case proceeded to trial. The complaint was filed in July 1992. Ther eafter, an answer and subsequently an amended answe r along with a counter-complaint was filed by Release. While written interrogatories were filed, there were no depositions taken and no preliminary motions by Rainbo. At trial, Rainbo presented witnesses who testified as to both the liability of Release as well as the monetary damages incurr ed by it as a result of Release’s improper straightening. Thereafter Release put on its proof in opposition to claims of liability as well as damage allegedly caused by it. At the close of all the proof the re were no motions by Rainbo for any delay. Following argument of counsel the court announced its ruling. The court proceeded at some length in re viewing the proof offered as to the issue of liability of Release, with emphasis given to the proof off ered by Rainbo. The court then stated: So the Court finds that indeed the plaintiffs have shown that the defenda nts did not p

roperly reform t heses pa ns, and the

n when the

y did properl y refor m them the s econd tim

e in termsof dimens ions that b ecause and as a proximate result of the first over expansion thatca used the prematu re wea r and tea r on these pans that caused t hem to bec ome useless. Therefore, judgment in favor of the plaintiffs must be re ndered against th e defen dants. Now, the question is as to the value. The Court does not find that the plaintiffs carried the burden of proof of fa ir market value. What the plaintiff have sho wn is this is w

hat it cost s us. Now, the plaintiffs, which is to the defendant’s advantage, have said that it only has a four year life span, a 48 month life expectancy, and they will be held to that for a f uture proceeding. The reason that’s advantage ous is because obviously that means for 14 months a large percentage of its use has occurred. But it’s not a straight mathematical progression. It may be for purposes of dea ling with the IRS, but it’s not in this Court’s opinion sufficient to deal with the real world, which is just like the very second you drive that brand new car off the showroom it’s depreciated. You put one mile on it, you’ve owned it for all of five minutes and it has depreciated a whole lot more than one4 mile in five minutes. And the Court does not find that the plaintiff carried that burden of proof. (emphasis added) What the Court will do is an order of reference to the Master in order that the plaintiff can get proper expert testimony on that, if possible, to reveal the true fair market value. Subsequently, counsel for Release inquired of the court as to what e xactly was being referred to the Master. The c ourt responded: “Fair market value as of the date that these pans w ere finally taken out of services when they could not be used any longer. . . .” The court thereafter proce eded at great length to explain to counsel for Rainbo just what type of proof he—the court—was seeking. Counsel for Relea se objected, stating:

MS. RENNIESEN: Your Honor, I would object to anymore testimony by any other witnesses, that’s what the purpose of the trial is for. The plaintiffs had every opportunity -- THE COURT: I understand that and I accept the fa ct that you object. But I can do that in terms of an order of refe rences. This is a Court of equity. The Court

has that d

iscretio n to do that

. The cour t then concluded hi s ruling a s follows: But the burden is on the plaintiffs, now. If the plaintiff can’t carry that burden before the Master, then they will walk awa y with nothing. The burden is on them. By the same token, that doesn’t mean it’s a one-way street. Your client has the opportunity to put on countervailing proof.

In the counter-complaint filed by Release the chanc ellor found in favor of Rainbo. He also declined to award prejudgment interest. At the subseque nt hearing before the Master, Rainbo presented one witness a s an expert. Release presented two witnesses. The Master found that “the fair market va lue of the goods in question (baking pans) on February 1991 was $19,904.85.” The cha ncellor affirmed the Master’s report and entered judgment for Rainbo in this amount.5 Back to the

original h

earing. As to the is sue of Release‘ s liability t o Rainbo, i n our opinion, while the proof in this case is quite close, nonetheless we affirm the chancellor. We also are of the opinion that the proof does not preponderate against the holding of the chancellor that Release should not recover on its counter claim. After finding for Rainbo on the issue of liability, the chancellor then proceeded to find that Rainbo had not carried its burden of proof as to the damages, a nd the reference to the Master followed. W e feel that there was a clear abuse of discretion by the chancellor in ordering a refer ence to a Master for a retrial of the issue of damages and that the judgment as to damages must be reversed. The chancellor has the prerogative within the bounds of discr etion to order a reference to a Master. In the case before us, it is not so much the question of the right of the chancellor to order a ref erence herein that concer

ns this court as it is that by virtue of ordering such a refere nce, Rainbo, in effect, received a “new trial” or “another bite at the apple” because it was allowed to re- present its case regarding the issue of damages after it had previously failed to do so. As noted, there wa s never a motion by Rainbo to c ontinue the case o r reope n the cas e in orde

r to obtain

a second chance to produce proof as to its damages.

At the tria

l itself, Ra

inbo, a co mmercia

l baking c ompany op erating in at leas t three states—Kentucky, Tennessee, and Ge orgia—presented two witnesses on the issue of damag es. The f

irst was Ch arles Ja

ckson, the

plant man ager of

the Atlan ta, Geor gia bakery. He testified that after it was discovere d that the pans straighte ned by Rel ease would not work, Rainbo bought re placeme nt pans at a price of thirty d

ollars and twenty five cents ($30.25) each and that the one thousand, two hundr ed and seventy eight (1,278) pans thus replaced would have cost thirty eight thousand, six hundred sixty nine dollars a nd thirty c ents ($38 ,669.30) . Rainbo’ s counsel could not q

ualify thi s witness t

o permit him

to testify as to the v alue of t

he pans a t the time o f the stra

ightening process by Release. This was the sum and substance of Jackson’s testimony. The second and final witness offered by Rainbo was Rober t Thompson, the6

comptroller of Rainbo at its home office in Louisville, Kentucky. Thompson testified that he was familiar with the records of the company a nd that the replacement pans were in fact acquired at a c ost of thirty dollars and twenty five cents ($30.25) each. While the chancellor allowed Thompson to testify that the pans were sixtee n months old at the time they were worked on by Release and that they ha d a depreciated value of about “twenty seven thousand dollars” ($27,000.00), Thompson testified that he had never pa rticipat ed in selli ng pans fo

r plaintif f and tha t he had no

idea wha t the fair market value of the pans would have been just prior to their straightening. The chancellor held that Thompson was not qualified to testify as to the fair market va lue of these pa ns due to a

lack of e xperience and k

nowledge in buying a

nd selling bread pa ns. While such testimony was offered by yet another witness at the he aring before the Master, there was never any c ontention or proof to the effect that this witness was not readily available at time of trial or that somehow the burden of proof as to damages placed upon Rainbo caught it by surprise. In the opinion of this court our decision in this matter is supported by the case of Higgins v. Steide , 335 S.W.2d 533, 47 Tenn. App. 42 (Tenn. App. 1959). While the facts are somewhat different in the two ca ses, the legal principles enunciated in Higgins are applicable to the case under c onsideration. Higgins arose as a result of plaintiff suffering injuries and damages when struck by defe ndant’s following vehicle. One of the witnesses to the accident, known to both parties, was a wrec ker driver, who was towing a vehicle on the highway. During the course of the trial it beca me apparent that defendant was not going to call the driver of the wrec ker as a witness, as anticipated by plaintiff . The tria l began on

June 8th a

nd the par ties close d their pr oof short ly thereafter on June 10th. For its own reasons the court continued the c ase until Monday, June 16th. During thi s interim, counsel f or plainti ff had lo cated the wrec ker driv er in Chicago, had flown there, taken the witness’ statement as to how the a ccident occurred and provided him with train fare and a schedule that would get him to Memphis by Monday morning in time for the trial. On that Sunday evening prior counsel for plaintiff receiv ed a spec ial delive ry letter from the witness ad

vising him th at he could7

not come to Memphis and be in court. Counsel for plaintiff proceeded on that Monday morning to explain to the court all that had happened and asked the cour t to continue the case to the following Wednesday and to reopen the case for proof. After considerable argument, the court granted plaintiff’ s counsel’s request to continue the case two more days to the following Wednesday, with the court a nnouncing that “the case will either p

roceed with such p

roof as h e tender s to the court in rebuttal or th e case will proceed as it would have proceeded this morning.” Counsel for plaintiff flew to Chicago and brought the witness back on the plane and had him in Memphis to testify on Wednesday the 16th. On that morning there was further argument between both counsel and the c ourt. The court advised plaintiff’s counsel that there had been no suggestion made at trial the wee k before about any further proof. Nonetheless, the court stated that it was within its discretion to allow such actions and stated to the jury that the case would be reope ned for the purpose of presenting what should be considered rebuttal proof. The witness testified in ope n court. In finding that the trial court had abused its discretion in reopening the Higgins case, c ourt in its o

pinion note d:

The record shows—and the learned Tr ial Judge was certainly aware of the record so showing , that Mr. Ewing, one of the counsel who

filed this suit and was associated then in the trial, attended the trial of Mr. Higgins had in City Court and from the record made of the traffic trial in City Court counsel for plaintiff was well aware long bef ore the declaration was filed that there was in fact a wrecke r, with an automobile attached to it at the scene when this accident occurre d. This court stated that plaintiff’s counsel was aware of the diligence re quired of him to have located the witness had he desired to do so and had him present during the trial.

In conclusion this court stated: [T]o approve such procedure will establish, in our opinion, such a precedent that could lead to undue prolongation of the trial of ca ses to the congestion of court dockets and embarrassment of litigants and trial courts. We doubt that it is within the exercise of sound discretion to continue a case fo r the re opening o f proof, under the circumst ances shown by this record . . . in our o

pinion the

re can b e no justif

ication f or contin uing a ca se8 and reopening the proof under the facts he re disclosed.

This cour t then stat ed that “ the Court d

id unduly e

xtend his j udicial d

iscretio n in so doing.” A more recent case quite similar to Higgins is that of Gerret y Co., Inc . v. Louis W. Palmie

ri, et al. , 526 A.2d 555 (Conn. App. 1987), where plaintiff lumber company brought suit against defendant seeking to recover for goods sold and de livered. Defendant counterclaimed for dama ges resulting to his home from the installation of alleged ly defec tive mate

rials. Af ter a jur y trial, pl aintiff w as awar ded dama ges on its complaint and defendant was awarded da mages on his counterclaim. The court granted plaintiff’s motion to set aside the verdict for the defendant against plaintiff and ga ve judgment f

or plainti ff on both

the compl aint and t

he counte rclaim. During a recess following the termination of direct examination of de fendant by defense counsel, the trial judge informed defense counsel that he had failed to introduce the necessary evidence of diminished value of the house. When court reconvened defense counsel moved to reopen as direc t examination. The trial court sustained plaintiff ’s objec tions to the

motion. No e

vidence of the diminished va

lue of the house was ever introduced.

In Connec ticut, ca se law ha s establis hed that d amages i nvolved in real pr operty are limite d to the dimi nished va lue of the propert y whenev er the c ost of re storation is dramatically larger than the differenc e in value. In Gerret y defendant in effect testified that the cost of restoration would be dramatically larger than the difference in value and it would not be economically feasible to make the restorations. In affirming the action of the trial court in refusing to reopen the proof, the Connecticut Court of Appeals stated:

The def endant di d not pres ent any te stimony dur ing his ca se in chie

f as to the diminut

ion of val ue of the house. He

attempte d to reope

n his case only afte r the cou rt alert ed him to the

defect in his cas e. Wheth

er or not a trial court will permit further evidence to be offer ed after the close of a9 party’s case-in-chief is a matter re sting within its sound discretion. . . . As the defe ndant had been give

n a full a nd fair o pportunit y to prese nt his case, we conclude that the court did not abuse its discretion in not allowing h

im to reope

n his exam

ination a fter be ing aler ted of his omissions. In sum, there is nothing in this record to the effect that Rainbo was unawar e of its burden of proof. It was well represented by c ounsel. There were no “hidden” or “reluc tant” wit

nesses. R ainbo simp ly failed to establi sh the fa

ir marke t value of its pans prior to their straightening, along with their diminished value afterwards. The chance llor’s action in per

mitting a r

etrial on the issue of damag es was a

n injustice

to the defendant. Nominal damages may be recove red where a cause of a

ction for a legal wrong is established but there is no proof of actual damage. Womack v. Ward , 186 S.W.2d 619 (Tenn. App. 1945). Only nominal damages are rec overable for the wrongful conversion or detention of personal property, in the a bsence of proof of actual damage or of the value of the property. Lay v. Bayles , 44 Tenn. 246, 4 Cold. 246 (Tenn. 1867). However, under these circumstance s, Rainbo is entitled to nominal damages. Accordingly, exercising our inherent right to do so, we awar d Rainbo nominal damages in the amount of one dollar ($1.00). While we are of the opinion that this case should have been c oncluded with the hearing before the chancellor, ne vertheless we feel constrained to examine the testimony o ffere d at the he aring held by the Ma ster, an d accor dingly re ach the s ame result. As directed by the chancellor, the hear ing was ordered for the purpose of Rainbo fin ding and p

resentin g expert

testimony a s to “fair

market v alue.” Fo

r this purpose, Rainbo presented only one witness, Russell Bundy, Jr., southeast sales manager for Pan-Glow/American Pan Company, a c ompany providing goods and services in competition with Release. Bundy testified that in 1991 he was provided with several pans by Rainbo that had been straightened and restraightened the second time by Release. He stated that these pans showed the effects of the two straightening ef forts. Bundy testified that10

assuming in 1991 new 1 1⁄2 pound King Pullman pans sold for thirty-one dollars and fifteen cents ($31.15) each, considering the c ondition of the pans that he observed, those pans would be worth approximately 50% of the value of a ne w pan, or 50% of thirty-one dollars and fifteen cents. Multiplying 1,278 of such pans by this amount, he stated the total value of the pans involved would be nineteen thousand, nine hundred and four dollars and eighty-five cents ($19,904.85). Bundy was qualified as an expert on the value of bakery pans by virtue of his preliminary testimony. Bundy’s evaluation in this regard was based upon his inspection of several of the subject pans that had already been straightened twice by Release. He admitted that he did not and

had not at

any time seen any of

Rainbo’s b aking pan s prior to them being sent to Release for straightening. On cross examination by Release’s counsel, Bundy was presente d with one of Rainbo’s used pans that was later identified by David Long, the owner of Re lease, without co ntradic tion, to be one of the

better p ans provi ded to Rele ase by Ra inbo to serve as a model for the making of the die to be used in the straightening. More importantly, this particular pan had not been straightened by Release. Bundy testified that this pan was worth seven to eight dollars, and was in such a condition that he would not attempt to straighten it.

In this state, the ordinary and basic measure of damage s for injury to personal property is the difference betwee n its market value immediately before and immediately after the injury. Irving Pulp and Paper, Ltd. v. Dunbar Transfer and Storage Co. , 732 F.2d 51 1 (6th Cir. 1984); Yazoo a nd M. V. R. Co . v. Willia ms , 185 S.W.2d 527 , 529 (Te

nn. 1945) ; Tennessee Jurisprudence , Damages, § 18, page 42. In his direct examination which was designed to establish “value”, ra ther than testifyin g as to the

fair mar ket value of Rainbo ’s sixtee

n month old p ans prior to Release’s straightening, Bundy mistakenly referred to the cost of ne w pans that had not experienced the trauma of the baking proc ess for sixteen months. As a result, Bundy11

failed to provide Rainbo with what it needed most—namely, the fair market value of Rainbo’s sixteen month-old pans prior to being straightened by Release. Moreover, in considering Bundy’s testimony in its totality, including both direct and cross-examination, he did in essence testify as to both the “bef ore” and “after” value of Rainbo’s pans, but with an unintended result. After examining a Rainbo pan identified without contradiction as being one of its best at the time that this contract was entered into, and that had not undergone either straightening proc ess, Bundy testified that this pan had a value of seven to eight dollars. He had ear lier testified that the value of Rainbo’s pan after two straightenings by Release had a va lue of fifteen dollars and fifty-seven cents ($15.57). The net effect of this testimony is that the pans of Rainbo were in such a condition that their value was enhanc ed—almost doubled—by virtue of the straightening process performed by Release a nd that Rainbo suffered no loss. Once again Ra inbo faile d to carr y its burde

n of proof as to dama

ges. Accordingly, the judgment of the trial court awarding Rainbo damages in the amount of

ninetee n thousand , nine hun dred and eighty-f ive cent s ($19,90 0.85) is modified. Rainbo is in lieu thereof awarded nominal damages in the amoun

t of one do llar ($1. 00). The decree of the ch ancello

r is in all o ther re spects affirmed. Costs in this cause are taxed one half to Rainbo and one ha lf to Release, for which execution may issue if necessary.

________________________________________ TOMLIN, Sr. J.

________________________________________ CRAWFORD, P. J. (CONC URS)

________________________________________ FARMER, J. (CONC URS)