Court Opinion

ID: 5157220
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:25:02.329466+00
Date Added: 2024-06-11T08:25:25.442340
License: Public Domain

RAPP, J.,
Dissenting in part, concurring in part and concurring in result in part.
BACKGROUND
A. Introduction.
¶ 1 B & J Restoration Services, Inc. (B & J) was in the cleaning and restoration business. B & J was owned by Brandon Hopper (B. Hopper) and Julie Hopper (J. Hopper). Larry Smoot (L. Smoot) and Connie Smoot (C. Smoot) wished to purchase the business. The Smoots formed a limited liability company, C & L Restoration Services, LLC (C & L). With the assistance of Sunbelt Business Brokers (Sunbelt), the Smoots submitted several offers and negotiated the purchase. The negotiations resulted in two contracts, both prepared by Sunbelt.
¶ 2 The first contract is the Purchase Contract (PC Agreement), dated October 4, *8192006.1 This document recites that it is an agreement between B & J, as the Seller, and the Smoots, as the Buyer. The text of the document provides that it is an agreement between B & J, as the Seller, and the Smoots, as the Buyer. The text of the PC Agreement refers to "Seller" or "Buyer" when naming a party to the PC Agreement.
¶ 3 The second contract is an Agreement Not To Compete And Training Agreement (ANC Agreement), dated November 27, 2006.2 The parties to this contract are C & L (termed "Buyer"), the limited liability company, and B & J (termed "Seller"), The document is signed by Connie L. Smoot, as managing member for C & L, and Brandon Hopper, as president of B & J. There are no other signatures on the document. Julie Hopper is not mentioned by name in the text of the document.
¶ 4 The Smoots claim that the Hoppers and B & J breached both contracts, as to their substance and as to the covenant not to compete, and sought to also impose personal liability on the Hoppers. The Smoots prevailed at trial, including imposition of personal liability on the Hoppers.
¶ 5 The issues in this appeal are: (1) whether B & J breached the contracts; (2) Hoppers' personal liability for breach of the Purchase Contract provisions exclusive of the non-competition provisions; (8) Hoppers personal liability under the Agreement Not to Compete Contract and the non-competition provisions of the Purchase Contract; (4) whether the trial court correctly instructed the jury as to measure of damages; and (5) award of attorney fees.
¶ 6 I concur with the Majority's resolution of issue number 1. I concur in result with the Majority's resolution of issue number 2. I dissent from the resolution of issue number 3. I concur in result regarding the Majority's disposition of issue number 4, jury instructions. I concur with the Majority's resolution of the attorney fee issue, with the exception that I would hold that any award against the Hoppers, individually, should be vacated with prejudice.
B. Fact Summary.
T7 The first contract is the PC Agreement, dated October 4, 2006.3 This doeument recites that it is an agreement between B & J, a corporation, as the Seller, and the Smoots, as the Buyer. The text of the Agreement refers to "Seller" or "Buyer" when naming a party to the PC Agreement. However, the signatures on this contract are by the Hoppers, without corporate designation, and it does not contain a signature block for the corporation, B & J. An attorney in the employ of Sunbelt prepared all the transaction documents and handled the closing. She testified that she mistakenly omitted the corporate designation in the signature block and a designation of Brandon Hopper as president and Julie Hopper as secretary.4
8 The second contract is the ANC Agreement, dated November 27, 2006.5 The parties to this contract are C & L, a limited liability company, (termed "Buyer") and B & J (termed "Seller"). The ANC Agreement provides for liquidated damages in the sum of $100,000.00. The document is signed by Connie L. Smoot, as managing member for C & L, and Brandon Hopper as president of B & J. There are no other signatures on the document.
C. Resolution of the Issues.
1. Breach of Contract by B & J.
¶ 9 Under the applicable standard of review, and after review of the record, I agree that the evidence was sufficient to establish that B & J, the corporation, breached both the PC Agreement and ANC Agreement. Therefore, I concur with the Majority on this issue.
2. Hoppers' Personal Liability/PC Agreement.
a. Liability For Contract Provisions Other Than Non-Competition.
¶ 10 The Majority holds that the Hoppers are not liable for the PC Agreement provi*820sions other than the non-competition provisions. I concur in result with this holding.
b. Hoppers) Liability For Non-Competition Provisions of PC Agreement.
{11 The Majority holds that the Hoppers are personally liable under the non-competition provisions in the PC Agreement. I dissent from this holding.
12 The Majority reached its holding notwithstanding the Majority's ruling that the Hoppers signed the PC Agreement in their corporate representative capacities and not individually. Thus, the Majority necessarily ruled that the Hoppers are not parties to the PC Agreement. I agree that they are not parties to the PC Agreement.
13 However, in order to reach the result of personal liability, the Majority examined language in the PC Agreement where "Seller," B & J, agreed not to compete as "individual, officer, employee, or any other capacity." The PC Agreement continues with language stating that the obligations extend to the officers, directors and shareholders of the Seller, and that the Seller bas the authority to bind the officers, directors, and shareholders.6
T 14 There is no evidence from which it may be concluded that B & J had the authority to bind the Hoppers. The mere fact that B & J, the principal, says that it has authority to bind its agents does not equate into legal responsibility on the part of the agents.
1 15 The record does not contain an ageney agreement or power of attorney authorizing B & J to contract for the Hoppers. See 15 00.98.2011, § 136 (agreements to answer for debt, default or miscarriage of another must be in writing). Next, the sole evidence is that the PC Agreement was meant to be executed by the corporation and the Majority so holds. The PC Agreement, by itself, does not inescapably lead to the conclusion that the parties intended for the Hoppers to be bound by its terms, in whole or in part.
1 16 This is not an instance where an agent with apparent authority binds its principal. Here, the Hoppers, in their corporate representative capacities executed the PC Agreement. "When an agent contracts in the name of his principal, the principal contracts, and is bound, but the agent is not." Mertz v. Owen, 1942 OK 165, ¶ 29, 191 Okla. 77, 126 P.2d 720, 727.
[17 The rule from the case of Carter v. Schuster, 2009 OK 94, 227 P.3d 149, applies here. Schuster signed an agreement on behalf of a limited liability company and a corporation as each entity's agent. The agreement contained an arbitration clause. The issue was whether Schuster could be treated by the arbitration authority as an individual party to the arbitration. There were no legal or equitable reasons to hold Schuster personally responsible under the contract. "Because Mr. Schuster was not found to have defrauded or committed a wrongful act against Dr. Carter, but only to have breached an alleged oral agreement between the two, neither Oklahoma statutory law nor case law supports requiring him to arbitrate pursuant to a contract that he signed only as manager and agent for Apex." Carter, 2009 OK 94 at ¶ 26, 227 P.3d at 156. Therefore, the Oklahoma Supreme Court held that Schuster could not be compelled to arbitrate.
4 18 There is no legal distinction here between Carter and the Hoppers' situation. As the Majority agrees, no basis exists to hold the Hoppers personally responsible other than having signed the PC Agreement in their representative capacities. Therefore, I dissent to the decision to hold Hoppers personally liable under the non-competition provisions of the PC Agreement.
c. Hoppers' Liability For Breach of ANC Agreement.
¶ 19 The ANC Agreement does not suffer from ambiguity because of signatures. When Larry Smoot identified the document in his testimony, he did not identify it as an agreement in any way binding on the Smoots *821individually. Moreover, nothing in its text suggests they signed as individuals and assumed lability. Julie Hopper's name does not appear on the document. Brandon Hopper executed the ANC Agreement in his capacity as president of B & J and not in his individual capacity.
{20 The Majority reasons that the Hoppers are individually liable because: (1) the ANC Agreement language is identical to the corresponding PC Agreement language; (2) Brandon Hopper's execution as president of B & J is binding on him individually absent his contention otherwise; (8) Brandon Hopper did not falsely represent that he had authority to bind Julie Hopper; and (4) the same reasons for finding personal liability as to the PC Agreement apply to the ANC Agreement.
€ 21 First, the rule from the case of Carter v. Schuster, 2009 OK 94, 227 P.3d 149, also applies here.
{22 Next, the parties to the ANC Agreement are not the same as the parties to the PC Agreement. The ANC Agreement is a contract between two entities, C & L Restoration Services, LLC. and B & J Restoration Services, Inc. The only evidence is that the ANC Agreement was meant to be executed by B & J, the corporation. There is no evidence that the Hoppers intended to be individually bound.
T23 There is no document purporting to empower B & J to bind the Hoppers individually. There is no document authorizing Brandon Hopper to bind Julie Hopper.7 Thus, the record does not contain an agency agreement or power of attorney authorizing B & J to contract for the Hoppers or for Brandon Hopper to contract for Julie Hopper. See 15 O.S.2011, § 136 (agreements to answer for debt, default or miscarriage of another must be in writing).
There is no evidence that Brandon Hopper intended to bind himself individually when he signed the ANC Agreement as the president of B & J. There is no evidence of fraud or in support of an equitable reason to disregard the entity status of B & J.
T 25 Therefore, I dissent from the imposition of personal lability on the Hoppers as to any aspect of either Agreement, singly or in combination. I would hold that the trial court erred in submitting the issue of Hoppers' personal liability to the jury, then entering a judgment on the verdict and not granting the Hoppers' motion for judgment NOV as to personal liability under the Agreement Not To Compete And Training Contract.
D. Jury Instructions.
T 26 I concur in the result reached by the Majority regarding jury instructions and add the following.
1. The Purchase Contract.
T27 The issue here is whether the trial court erred by omitting the last sentence from the OUJI 28.51. Thus, the trial court did not instruct the jury about how to caleu-late damages for the particular type of contract, the PC Agreement, and claims under the contract. In the absence of those criteria as to damages, the jury returned the purchase price to the Smoots. Hoppers argue that the verdict amounted to a rescission remedy.
128 The issue for this Court is whether the trial court erred in failing to include instruction to the jury as to proper means to determine the damages. The measure of damages for breach of contract is the amount that would place the aggrieved party in the position he would have occupied had the breach not occurred. Title 23 0.8.2011, § 21, provides that the contract measure of damages is the amount that will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things would be likely to result therefrom.
129 The benefit of the bargain rule, as applied in fraud cases, provides the plaintiff *822with the difference between the value the plaintiff gave and the amount the defendant represented the plaintiff would receive. Bowman v. Presley, 2009 OK 48, ¶ 14, 212 P.3d 1210, 1218; LeFlore v. Reflections of Tulsa, Inc., 1985 OK 72, 183, 708 P.2d 1068, 1076.
¶ 30 The benefit of the bargain, or expectation interest, principle has been applied universally as a measure of damages for breach of contract.8 Ford v. Trendwest Resorts, Inc., 146 Wash.2d 146, 48 P.3d 1223, 1227 (2002) (contract damages are ordinarily based on the injured party's expectation interest and are intended to give that party the benefit of the bargain by awarding him or her a sum of money that will, to the extent possible, put the injured party in as good a position as that party would have been in had the contract been performed); Thorp Sales Corp. v. Gyuro Grading Co., Inc., 111 Wis.2d 431, 331 N.W.2d 342, 346-47 (1983) (party injured by breach of contract is entitled to the benefit of his agreement); Vanderpool v. Higgs, 10 Kan.App.2d 1, 690 P.2d 391 (1984); Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882 (Tex.App.2004).
131 Thus, the first paragraph of the Restatement reiterates the Oklahoma rule regarding contract damages by providing that the "expectation interest" is an individual's "interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed." Restatement (Second) of Contracts § 344 (1981) (emphasis added).
132 Here, the subject of the PC Agreement was the purchase of a business, including its assets, franchise, goodwill, and the covenant not to compete. The ANC Agreement separately provides for a covenant not to compete, but with different parties. The evidence demonstrated that the PC Agreement was breached in several respects with the result that the Smoots did not receive what they had bargained for, although they did receive some things of value. The Smoots' argument is essentially that there was a complete breach of the PC Agreement. However, the trial court removed the rescission remedy from consideration.
133 The PC Agreement provides the terms of the bargain for the sale of a "business" by B & J to the Smoots. The benefit of the bargain to the Smoots is to own the "business" and this "business" was supposed to have a value, determined here by the PC Agreement after negotiation. The Smoots' cause is that they did not receive the benefit of their bargain because B & J totally breached the PC Agreement.
34 Therefore, I would add that the measure of damages for breach of the PC Agreement provision for sale of the business is the difference between the value of the business had it been transferred as agreed and the value of the business as actually delivered, plus the loss of net profits, if any, to the date the Smoots ceased operations. The jury should have been instructed accordingly by completing Instruction 22. The measure of damages for breach of the ANC Agreement is compensation for the detriment caused by the breach.
€ 85 Thus, I would reverse the cause and remand the cause for a new trial on the issue of damages only as against B & J Restoration Services, Inc.
2. The Agreement Not To Compete Contract.
36 I concur with the Majority's Opinion regarding liquidated damages.
SUMMARY AND CONCLUSION
137 Pursuant to the standard of review, the Smoots and C & L established breaches *823by B & J of the Purchase Contract and the Agreement Not To Compete Contract. However, the Hoppers are not parties to either contract and the trial court erred in submitting their liability on these contracts to the jury and, therefore, should have granted their motion for judgment NOV. I would reverse entirely the judgment against Brandon Hopper and Julie Hopper, individually, rather than hold them liable only for breach of the non-competition provisions as the Majority does. The judgment against them for costs and attorney fees should be vacated with prejudice.
$38 The trial court erred in failing to include a jury instruction explaining the proper means to determine the damages for breach of the Purchase Contract. I would reverse and remand this cause for a new trial on the issue of damages only as against B & J Restoration Services, Inc. for breach of the Purchase Contract. The Majority correctly vacated the judgment for attorney fees and costs for breach of the Purchase Contract, without prejudice as to B & J.
T39 The trial court erred for failing to determine, as a matter of law, whether the liquidated damages clause in the Agreement Not To Compete is enforceable against B & J.9 If it is not enforceable, then the jury must be instructed as to the measure of damages for breach of that contract by B & J. The Majority correctly reversed the trial court's judgment denying the motion for judgment NOV as to the liquidated damages provision.
140 The Majority's ruling necessarily requires that the judgment for attorney fees and costs for breach of the PC Agreement and ANC Agreement be vacated without prejudice. Thus, I concur in that disposition, except as to the Hoppers individually, and in their case I would reverse the judgment and vacate with prejudice.

. Defendants' Ex. 21.

. Defendants' Ex. 22.

. Defendants' Ex. 21.

. Tr. Vol. 1, pp. 511-12.

. Defendants' Ex. 22.

. It is undisputed that the Hoppers are the sole officers, directors and shareholders of B & J and that B & J is the "Seller."

. The Majority maintains that the absence of Julie Hopper from the ANC Agreement is immaterial because she is liable under the PC Agreement and similar language therein. Such concession necessarily concedes that Julie Hopper is not a party to the ANC Agreement and is not bound thereby pursuant to any agency theory.

. The Restatement sets out the principles:
Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee:
(a) his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed,
(b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or
(c) his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party.
Restatement (Second) of Contracts, § 344 (1981).

. Although I dissent from holding the Hoppers personally liable, I am of the view that the issue of whether the liquidated damages provision is enforceable must be decided as to each defendant independently. '