Opinion ID: 344197
Heading Depth: 2
Heading Rank: 2

Heading: other lost marketing fees of asa

Text: 83 Both F-M and W-R contest the awarding of $8,280 to ASA for the lost marketing fees on the non-assignor growers. Both F-M and W-R note that the record is silent on whether these growers suffered any losses. In fact there was no evidence that these growers actually planted the defective seed. F-M and W-R do not contest that ASA could recover these damages, but rather dispute whether the damages have been proven. 84 The Magistrate used estimates on the amount of okra produced from both good and bad seed, and multiplied the difference by the estimated amount of seed distributed to all growers to arrive at the estimated lost amount of okra due to the defective seed. This figure was multiplied by the gross sales price of okra, which figure was then multiplied by the marketing fee to arrive at the estimated total marketing fee loss suffered by ASA, $10,533. The Magistrate subtracted from $10,533 the agreed-upon $2,253 lost marketing fees to arrive at the disputed $8,280 figure. We do not quarrel with the method of computation. 85 The record is silent as to any evidence that these growers actually produced the off variety okra and suffered resulting losses. There was testimony on losses from growers who had assigned their claims to ASA. There also was expert testimony as to the estimated losses sustained by the non-assignor growers. In our opinion the evidence was sufficient to support the calculations made by the Magistrate, which calculations were approved by the District Court.C. LOSS OF GOOD WILL 86 F-M and W-R argue that the District Court's award of $25,000 damages to ASA for loss of good will was error. Initially it must be recalled that ASA purchased its business from Crockett Farms in 1966. The purchase price included Crockett's goodwill but the amount for goodwill was not specified. ASA offered no evidence as to the purchase price of the goodwill nor the current book value of its goodwill. No officer of ASA testified as to the extent of damage to the goodwill of the corporation. W-R claims that the $25,000 figure was arrived at in an arbitrary manner, in effect, taken out of thin air. Both F-M and W-R argue that the $25,000 award was specious in light of ASA's entering the business world just when the okra controversy occurred. In fact W-R notes that the Magistrate's finding adopted by the District Court, was conjectural, incompetent and speculative in nature. 87 The burden of proving the loss of goodwill, W-R argues, is upon ASA. Factors to be considered in determining the loss of goodwill are the following: the length of time the business has been in existence; its average profits; its success; and the likelihood of its continuing business under the same name. Because ASA had been in business for only one year, had not shown a profit, and had placed great emphasis on okra for its success, ASA had not suffered $25,000 loss of goodwill. Despite ASA's problems, it has not lost the growers' confidence, F-M and W-R argue. 88 Lastly, W-R maintains that the Magistrate had authority only to make findings as to the extent of damages suffered by ASA, not the elements of damage. By determining that ASA suffered a grievous loss to its business and goodwill, the Magistrate overstepped his judicial authority and his findings are clearly erroneous under Fed.R.Civ.P. 53(e)(2). 89 After the District Court made findings of fact and conclusions of law, the case was referred to the Master for the purpose of determining the amount of damages which ASA was entitled to recover. The District Court ruled that ASA was entitled to recover damages which may properly and proximately flow from the wrongs found to have been committed by F-M and W-R. 90 During the hearing before the Special Master, United States Magistrate Aaron Brown, Jr., testimony was developed concerning the nature and set-up of ASA's business. Basically, ASA took over Crockett Farms in 1966. The employees of ASA then embarked on an ambitious program to explain to Western Tennessee farmers the cooperative farming system and the farmers' relation to the cooperatives. Through this set-up ASA channeled to the farmers through its employees its agricultural expertise on various farming techniques. On the whole ASA's efforts could be termed a success, as 5,000 individual growers joined ASA. 91 In order for ASA to succeed in its farming efforts, financing was needed to purchase harvesting equipment and to buy stations. A successful first year crop was needed to obtain unguaranteed financing. Previously ASA relied on Wintergarden Freezer Company's goodwill in obtaining a $1.5 million loan. 92 ASA contends, however, that the bad seed from F-M harmed its early business efforts in two ways: first, growers' confidence in ASA's expertise was diminished; and second, ASA's ability to obtain financing on its own, was hindered. In fact, some growers testified that they would not again attempt to grow okra. 93 The Magistrate in fixing the $25,000 damage to ASA's loss of business and goodwill, considered the following factors: (1) the number of growers producing okra for ASA, at least 2,000 farmers; (2) 64% of ASA's employee expenses went to the okra program; (3) ASA obtained a $1.5 million loan to finance its operations through the auspices of Wintergarden; (4) the stipulated loss to the assignor growers caused by the defective seed, was $30,000; and (5) the estimated loss to all growers, caused by the defective seed, was $140,000. The Magistrate did not consider any losses related to the 1969 okra crop because that okra was not purchased from F-M. 94 The power and authority of a Master is dependent upon the District Court's order of reference. Fed.R.Civ.P. 53(c). If the Master's exercise of power is valid, his findings of fact in a non-jury action shall be accepted by the District Court unless clearly erroneous. Fed.R.Civ.P. 53(e)(2). 95 In United States v. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948), the Court stated: 96 A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. 97 In the present case the Master acted within the District Court's order of reference in determining what the amount of damages to ASA, proximately caused by W-R's wrong, included loss of business and goodwill. Such damages were consequential damages from ASA's distribution of the bad seed. Whether the damages suffered to goodwill were $25,000, however, is another matter. 98 Defining that which constitutes goodwill is not easy. In Bradford v. Montgomery Furniture Co., 115 Tenn. 610, 629-630, 92 S.W. 1104, 1109 (1905), the Tennessee Supreme Court said: 99 The good will of a firm is a species of property, often very valuable and it may be sold and transferred. It is defined by Judge Story as follows: This good will may be properly enough described to be the advantage or benefit which is acquired by an establishment beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it received from constant and habitual customers, on account of its local position or common celebrity or reputation for skill, or affluence or punctuality, or from other accidental circumstances or necessities, or even from ancient partiality or prejudices. Story on Part., sec. 99. 100 Again in Fine v. Lawless, 139 Tenn. 160, 165-66, 201 S.W. 160, 161 (1917), the Tennessee Supreme Court noted: 101 The doctrine of good will has proven to be so salutary in effecting just results that it has been constantly expanding with the result that the definition of the word itself has been broadened as the doctrine has developed. This was noted in Slack v Suddoth, 102 Tenn., 375, 52 S.W. 180, 45 L.R.A., 589, 73 Am.St.Rep. 881, where it was said: 102 It is difficult to define what 'good will' is. Lord Eldon said that it was simply 'the possibility that the old customers will resort to the old place.' Crutwell v. Lye, 17 Vesey, 335; Moreau v. Edwards, 2 Tenn.Ch. 349. But in Christian v. Douglass, Johns.Eng.Ch. 174, it was said that this was too narrow a view to take of it, and there it was said that it was every positive advantage acquired, arising out of the business of the old firm, whether connected with the premises where it was carried on, with the name of the late firm, or with any other matter carrying with it the benefit of the business of the old firm. 103 More recently in Young v. Cooper, 30 Tenn.App. 55, 74, 203 S.W.2d 376, 384 (1947), the Tennessee Court of Appeals said: 104 The good will of a business is the reasonable expectation of its continued profitable operation. Many factors are involved: the name of the firm, its reputation for doing business, the location, the number and character of its customers, the former success of the business, and many other elements which would be advantageous in the operation of the business. Good will is a property right which may be sold. Piggly-Wiggly Corporation v. Saunders, 6 Cir., 1 F. (2d) 572. 105 Other elements of goodwill include the length of time the business has been in existence; its average profits; and the probability of its continuance under the same name. 38 Am.Jur.2d Good Will § 25 (1968). Of course each loss of goodwill must be considered in light of the facts and circumstances of the case. 106 We are well aware of the difficulty in ascertaining damage to goodwill. Often the evidence available to determine the damage is intangible, non-quantifiable. On the other hand, damages are not permitted which are remote and speculative in nature. Summers v. Sanderson, 7 Tenn.App. 624, 628 (1928); and Donnelly v. Jackson Brothers, 2 Hig. 408, 415 (Civ.App.Tenn.1911). A plaintiff must present 'data from which the amount of probable loss could be ascertained as a matter of reasonable inference'. Cecil Corley Motor Co. v. General Motors Corp., 380 F.Supp. 819, 854 (M.D.Tenn.1974), quoting from Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 379, 47 S.Ct. 400, 71 L.Ed. 684 (1925). To set a quantifiable damage figure arbitrarily is impermissible. It would not be a reasonable inference but would be pure guesswork. 107 In the present case we are of the opinion that the Magistrate's findings with respect to goodwill, approved by the District Court, are not supported by substantial evidence and are clearly erroneous. When the okra crop failed, ASA was in business scarcely more than a year. Although many farmers participated in the cooperative okra project, often at the insistence of ASA and fellow growers, their loss of confidence in growing okra did not necessarily translate in loss of confidence in ASA. The testimony at the trial clearly demonstrated the fact that ASA was entirely innocent of the 1968 okra crop failure. The fault rested elsewhere. Even though some assigned growers at the damage hearing testified that they had lost confidence in okra, others have never quit growing the plant, or have recently replanted the seed. Further, any lack of confidence of growers in ASA could with equal propriety have resulted from the 1969 okra crop failure which involved okra seed not purchased by ASA from F-M. Thus, because growers lost profits in 1968 from the bad seed and ASA lost marketing fees, does not necessarily mean that ASA's goodwill suffered. The record is barren of evidence of growers becoming disillusioned with ASA. 108 Likewise, bare allegations that ASA was harmed in the financial community are insufficient. Testimony was lacking on which financial institutions denied ASA credit and if so when, and if they required more security of ASA on account of the 1968 okra set-backs. In short, ASA has not proven any nexus between the losses attributed to the defective seed and any loss of business and goodwill. VI INDEMNITY 109 F-M contends that it is entitled to indemnification from W-R for any liability to ASA. F-M argues that it was not guilty of any wrongdoing, but merely relied on the misrepresentations of W-R, on whose shoulders all fault rests. 110 In Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Cal.3d 622, 628, 119 Cal.Rptr. 449, 452, 532 P.2d 97, 100 (1975), the Court said: 111 Indemnity may be defined as the obligation resting on one party to make good a loss or damage another party has incurred. This obligation may be expressly provided for by contract, it may be implied from a contract not specifically mentioning indemnity, or it may arise from the equities of particular circumstances. (Citations omitted) 112 In Aetna Life & Cas. Co. v. Ford Motor Co., 50 Cal.App.3d 49, 52, 122 Cal.Rptr. 852, 854 (1975), the Court stated: 113 (Indemnity) applies in cases in which one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party. 114 The Court further states (at 53, 122 Cal.Rptr. at 854): 115 The ultimate determination of whether or not indemnity should be allowed depends upon the circumstances of each case. 116 The Court, in Taggart v. California, 45 Cal.App.3d 768, 770-71, 119 Cal.Rptr. 696 (1975), quoting from General Elect. Co. v. Cal. ex rel. Dept. Pub. Wks., 32 Cal.App.3d 918, 922, 108 Cal.Rptr. 543, 545 (1973), which quoted from Atchison, T. & S.F. Ry. v. Lan Franco, 267 Cal.App.2d 881, 886-87, 73 Cal.Rptr. 660 (1968), said: 117  '(T)wo critical prerequisites are generally necessary for the invocation of non-contractual implied indemnity in California: (1) The damages which the claimant seeks to shift are imposed upon him as a result of some legal obligation to the injured party; and (2) it must appear that the claimant did not actively nor affirmatively participate in the wrong.' 118 The foregoing rule that one seeking equitable indemnity from his joint tortfeasor must not have actively or affirmatively participated in the wrong, has been widely followed in California. (Citations) 119 Thus, an automobile insurance company in an indemnity suit was permitted to show that it had been secondarily liable to the victim and that the automobile manufacturer was primarily liable. Aetna Life & Cas. Co. v. Ford Motor Co., supra. 120 The lessor of a crane who was neither negligent nor had knowledge of the defective crane, had a right of implied indemnity against the persons primarily or actively at fault. Green v. City of Los Angeles, 40 Cal.App.3d 819, 838, 115 Cal.Rptr. 685, 698 (1974). 121 The difference between primary and secondary liability focuses on the type of the wrong rather than one of degree of negligence or comparative negligence. Bill Loeper Ford v. Hites, 47 Cal.App.3d 828, 832, 121 Cal.Rptr. 131 (1975). 122 Of course in an indemnity suit the party claiming a passive role must prove its own lack of active negligence. Aetna Life & Cas. Co. v. Ford Motor Co., supra at 55, 122 Cal.Rptr. at 855. 123 In the present case F-M's wrongdoing could relate only to its reliance on W-R's representations as to the seed. The only claim of negligence made against F-M was its failure to conduct sufficient and effective tests on the seed delivered to it by W-R. However, with the needed delivery of the seed by F-M to ASA, F-M had no opportunity to conduct any effective tests prior to delivery. 124 The active role in the wrongdoing was played by W-R. F-M merely acted as a conduit in delivering the seed to ASA. This was conclusively shown in the District Court. It would be unfair to hold F-M liable for any wrongdoing when ultimate responsibility rests with W-R. Thus, F-M is entitled to full indemnity from W-R for its liability to ASA. 125 It is therefore ordered that the judgment of the District Court in favor of ASA against F-M and W-R, for damages, be reduced by the elimination therefrom of the item of $25,000 for damages to goodwill; that its denial of indemnity and breach of express warranty claims to F-M from W-R be reversed, and in all other respects the judgment of the District Court is affirmed. This cause is remanded to the District Court with instructions to enter judgment in favor of F-M against W-R for the entire amount of the judgment for damages entered in favor of ASA and against F-M and W-R, and for compliance with this opinion.