Court Opinion

ID: 4663228
Source: CourtListenerOpinion
Date Created: 2021-02-26 15:06:24.836176+00
Date Added: 2024-06-11T08:02:27.307526
License: Public Domain

RENDERED: FEBRUARY 19, 2021; 10:00 A.M.
                       NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                            Court of Appeals

                             NO. 2019-CA-1839-MR

VOGT, THE CLEANERS, INC.                                           APPELLANT

             APPEAL FROM JEFFERSON CIRCUIT COURT
v.       HONORABLE JUDITH E. MCDONALD-BURKMAN, JUDGE
                     ACTION NO. 15-CI-002996

HAMHED, LLC; VERITAS ENTERPRISES,
D/B/A CAFÉ LAUNDRY; MICAH REED;
AND ERIC HEDRICK                                                    APPELLEES

                                   OPINION
                                  AFFIRMING

                                  ** ** ** ** **

BEFORE: CALDWELL, COMBS AND L. THOMPSON, JUDGES.

THOMPSON, L., JUDGE: Vogt, the Cleaners, Inc. appeals from orders of the

Jefferson Circuit Court which found in favor of Appellees after a bench trial. We

find no error and affirm.
                        FACTS AND PROCEDURAL HISTORY

                 Vogt is a laundry cleaning service owned and operated by Robert

Vogt and his wife, Dana Vogt. Vogt became aware of a government contract for

doing laundry for an Army cadet program at Fort Knox, Kentucky during the

summer of 2014. Vogt was not a certified government contractor and could not

bid on the job. Vogt contacted Hamhed, LLC, which was a certified government

contractor. Vogt wanted Hamhed to act as the general contractor for the contract

and subcontract the cleaning duties to it. During this time Eric Hedrick, Alan

Berry,1 and John Obermeier2 owned Hamhed.

                 The government proposal information indicated that the Army

estimated there would be 7,500 cadets at the program. The Army also estimated

that there would be 67,080 t-shirts, 67,080 pairs of socks, 67,080 uniform tops,

67,080 pairs of underwear, 67,080 other types of t-shirts, 67,080 pairs of shorts,

22,360 pairs of jeans, 22,360 shirts, 22,360 towels, 22,360 wash cloths, 22,360

hand towels, and 22,360 laundry bags. Based on this information, Hamhed

requested that Vogt prepare a bid. Vogt did so and indicated it could meet the

Army’s estimated laundry needs for $377,844.00. As an example of what the bid

looked like, Vogt indicated it would charge $0.45 per t-shirt, with the estimated

1
    Mr. Berry left Hamhed, LLC before this lawsuit began.
2
    Mr. Obermeier had no dealings with the Vogts or the Army concerning this contract.

                                                -2-
number of t-shirts being 67,080.00. This would make a total of $30,186.00 for t-

shirts. Vogt then sent this bid to Hamhed. Hamhed increased each price point

$0.02 to create a profit margin for it. For example, Hamhed turned Vogt’s $0.45

per t-shirt bid into $0.47. When Hamhed turned the bid into the Army, the overall

price had increased to $386,604.40. This indicated an $8,720.40 profit margin for

Hamhed.

            Hamhed was awarded the Army contract. The Army contract

indicated Hamhed would only get paid based on the actual number of pieces of

laundry that were laundered, not based on the estimated number. Hamhed then

hired Vogt as its subcontractor. There was no written contract between Hamhed

and Vogt. At first, the Army was only going to pay one lump sum payment at the

conclusion of the contract; however, Vogt needed periodic payments in order to

keep paying for supplies and labor costs. As the job progressed, Vogt began

keeping a tally of the number of items it laundered. Vogt would then send these

tally sheets to Hamhed, which would pass them on to the Army. The Army would

then pay Hamhed for the number of items cleaned, and Hamhed would then pay

Vogt.

            As it turns out, the number of cadets who participated in the summer

program was far fewer than estimated by the Army. Consequently, the number of

items being laundered by Vogt was significantly lower, and Vogt was not receiving

                                       -3-
as much money as it anticipated. A meeting was held between Vogt, Hamhed, and

a contact person with the Army where some aspects of the contract were

renegotiated, such as how quickly the items were to be cleaned and how the items

would be delivered to Vogt. Hamhed and the Army, without knowledge or input

from Vogt, then began to renegotiate their contract between themselves. Since it

was clear that only about 1/3 of the anticipated laundry was going to be available,

and the Army had allocated $386,604.40 for the project, Hamhed convinced the

Army to increase the price per piece of laundry by around 258%. Hamhed then

informed Vogt that it would be increasing Vogt’s payments by about 26%. It is

undisputed that Hamhed did not pass the entire 258% increase on to Vogt and that

Vogt did not know about the full 258% increase until much later.

             After the end of the cadet program, the full $386,604.40 had not been

paid out by the Army; therefore, the contract between Hamhed and the Army was

altered again. This time, the Army allowed Hamhed to launder linens, such as

blankets, pillows, and pillow cases. Hamhed then allowed Vogt to do this

cleaning. In the end, the Army paid Hamhed a total of $386,704.00 over the

course of the performance of the contract. Of that money, Vogt was paid

$176,147.05 and Hamhed kept $210,556.00.

             Additionally, during the course of the summer of 2014, Vogt was

attempting to purchase a second laundry establishment to help facilitate the

                                        -4-
cleaning of the Army laundry. Vogt opted to purchase a business known as the

Wash House from Frank Gonzalez for $80,000.00. Mr. Gonzalez allowed the

Vogts to make three payments for the business. The Vogts made the first two

payments, but did not make the final payment. The Vogts were intending to use

the money from the Army contract to purchase the Wash House, but because they

were not receiving as much money as they anticipated, they could not make the

final payment. Soon after the purchase agreement was terminated, Micah Reed,

who owned Veritas Enterprises, bought the Wash House.

             Vogt eventually brought the underlying action against Hamhed and

Mr. Hedrick alleging breach of contract, fraud, and misrepresentation. Vogt

believed it would be paid the full $377,844.00 regardless of the number of items of

laundry it cleaned. Hamhed claimed that the contract was always based on a price

per piece of laundry. Vogt later filed an amended complaint which brought Mr.

Reed and Veritas Enterprises into the lawsuit. The amended complaint alleged that

Mr. Reed and Mr. Hedrick conspired to keep Vogt from receiving the full amount

of money it was entitled to so that it would default on the purchased of the Wash

House and Mr. Reed and his company could then purchase it.

             On December 2, 2019, after a four-day bench trial, the court found in

favor of Appellees. It concluded that the contract price was based on a per piece

basis and not a fixed price, that there was no breach of contract, that there was no

                                         -5-
fraud or misrepresentation, and that there was no tortious interference with a

prospective business in regard to the Wash House. Appellant moved to alter,

amend, or vacate, but that motion was denied. This appeal followed.

                                    ANALYSIS

             Vogt’s first argument on appeal is that the trial court erred in finding

there was no breach of contract. Vogt claims that the oral contract it had with

Hamhed entitled it to $377,844.00 and that it was not contracted to be paid per

piece of laundry. This is directly contrary to what the trial court found.

                 The Court of Appeals [is] entitled to set aside the trial
             court’s findings only if those findings are clearly
             erroneous. And, the dispositive question that we must
             answer, therefore, is whether the trial court’s findings of
             fact are clearly erroneous, i.e., whether or not those
             findings are supported by substantial evidence.
             “[S]ubstantial evidence” is “[e]vidence that a reasonable
             mind would accept as adequate to support a conclusion”
             and evidence that, when “taken alone or in the light of all
             the evidence, . . . has sufficient probative value to induce
             conviction in the minds of reasonable men.” Regardless
             of conflicting evidence, the weight of the evidence, or the
             fact that the reviewing court would have reached a
             contrary finding, “due regard shall be given to the
             opportunity of the trial court to judge the credibility of
             the witnesses” because judging the credibility of
             witnesses and weighing evidence are tasks within the
             exclusive province of the trial court. Thus, “[m]ere doubt
             as to the correctness of [a] finding [will] not justify [its]
             reversal,” and appellate courts should not disturb trial
             court findings that are supported by substantial evidence.

                                         -6-
Moore v. Asente, 110 S.W.3d 336, 353-54 (Ky. 2003) (footnotes and citations

omitted).

             Here, the trial court concluded that the evidence before it indicated

that the contract was to be paid on a per piece basis. We agree. Hamhed was

being paid on a per piece basis by the Army, Vogt was required to send in a per

piece pricing sheet for the bid, and Vogt was required to send invoices or tally

sheets to Hamhed in order for Hamhed to pay Vogt during the contract period. In

addition, after reviewing all the testimony from this case, Mr. Hedrick and Mr.

Berry both consistently testified that the contract was based on a per piece price

and not a set price of $377,844.00 While Mr. and Mrs. Vogt testified that the

contract was for a fixed price amount, this is not enough to set aside the trial

court’s findings. The trial court found Appellees’ evidence more convincing, and

we must defer to the trial judge’s ability to weigh the evidence and judge the

credibility of the witnesses. We find no error on the breach of contract issue.

             Vogt’s second argument on appeal is that Appellees made fraudulent

misrepresentations to it. Vogt claims that Hamhed committed fraud by only

passing on 26% of the increase in pricing, as opposed to the full 258%.

             In a Kentucky action for fraud, the party claiming harm
             must establish six elements of fraud by clear and
             convincing evidence as follows: a) material
             representation b) which is false c) known to be false or
             made recklessly d) made with inducement to be acted
             upon e) acted in reliance thereon and f) causing injury.

                                          -7-
United Parcel Service Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999) (citation

omitted).

             To prevail on a claim of fraud by omission, or fraud
             based on failure to disclose a material fact, a plaintiff
             must prove: a) that the defendants had a duty to disclose
             that fact; b) that defendants failed to disclose that fact; c)
             that the defendants’ failure to disclose the material fact
             induced the plaintiff to act; and (d) that the plaintiff
             suffered actual damages. A duty to disclose facts is
             created only where a confidential or fiduciary
             relationship between the parties exists, or when a statute
             imposes such a duty, or when a defendant has partially
             disclosed material facts to the plaintiff but created the
             impression of full disclosure.

Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 641 (Ky. App.

2003) (citations omitted).

             Here, the trial court found no fraud. The court held that Hamhed

obtained a price increase from the Army and passed a portion of that increase on to

Vogt. The court also held that the increase in price was based on the contract

between Hamhed and the Army and could not have been used to induce Vogt to

perform under the subcontract. We agree with the trial court. The increase in price

was based on the contract the Army had with Hamhed. Hamhed was under no

obligation to pass any of that increase on to Vogt or inform Vogt of the full amount

of the increase. Furthermore, Vogt was paid an additional 26% per piece of

                                          -8-
laundry and did not know about the 258% increase; therefore, there was no false

statement or misrepresentation.

             Vogt’s third argument on appeal is that Hamhed violated the implied

covenant of good faith. “The implied covenant of good faith and fair dealing

simply ‘impose[s] on the parties . . . a duty to do everything necessary to carry’ out

the contract.” Harvest Homebuilders LLC v. Commonwealth Bank And Tr. Co.,

310 S.W.3d 218, 220 (Ky. App. 2010) (citation omitted). Vogt argues that by not

paying it the full $377,844.00, Hamhed breached this covenant. Vogt does not cite

to where this issue was raised before the trial court, and our review of the record

could find no mention of this issue; therefore, it is waived. “The Court of Appeals

is without authority to review issues not raised in or decided by the trial court.”

Regional Jail Authority v. Tackett, 770 S.W.2d 225, 228 (Ky. 1989); see also

Shelton v. Commonwealth, 928 S.W.2d 817, 818 (Ky. App. 1996). “[E]rrors to be

considered for appellate review must be precisely preserved and identified in the

lower court.” Skaggs v. Assad, by and through Assad, 712 S.W.2d 947, 950 (Ky.

1986) (citation omitted).

             Vogt’s fourth argument concerns a motion for a mistrial it filed after

the first two days of trial and after Vogt retained new counsel. The motion

requested a mistrial because Vogt’s first trial counsel erroneously waived its right

to a jury trial, a witness was not allowed to testify, and the trial court allowed

                                          -9-
evidence of settlement negotiations to be introduced during trial. The court

ultimately denied the motion for a mistrial. We will address each issue.

             First, as to the waiver of a jury trial, Vogt did not request a jury trial in

this case until after the first two days of testimony and after retaining new counsel.

All of the defendants, however, requested a jury trial. Eventually, the defendants

waived their rights to a jury trial and agreed to a bench trial. What we must decide

is did the trial court err in not allowing Vogt to have a jury hear the final two days

of testimony in this case and does the lack of a jury require a mistrial.

             “A mistrial is appropriate only where the record reveals ‘a manifest

necessity for such an action or an urgent or real necessity.’. . . A trial court has

discretion in deciding whether to declare a mistrial, and its decision should not be

disturbed absent an abuse of discretion.” Clay v. Commonwealth, 867 S.W.2d 200,

204 (Ky. App. 1993) (citations omitted).

                It is universally agreed that a mistrial is an extreme
             remedy and should be resorted to only when there is a
             fundamental defect in the proceedings which will result
             in a manifest injustice. The occurrence complained of
             must be of such character and magnitude that a litigant
             will be denied a fair and impartial trial and the prejudicial
             effect can be removed in no other way.

Gould v. Charlton Co., Inc., 929 S.W.2d 734, 738 (Ky. 1996) (citations omitted).

             Any party may demand a trial by jury of any issue triable
             of right by a jury by serving upon the other parties a
             demand therefor in writing at any time after the
             commencement of the action and not later than 10 days

                                          -10-
              after the service of the last pleading directed to such
              issue. Such demand may be indorsed upon a pleading of
              the party, and if indorsed on the complaint, the filing of
              the complaint shall constitute service of the demand.

Kentucky Rule of Civil Procedure (CR) 38.02.

              The failure of a party to serve a demand as required by
              this rule and to file it as required by Rule 5.05 constitutes
              a waiver by him of trial by jury. A demand for trial by
              jury made as herein provided may not be withdrawn
              without the consent of the parties.

CR 38.04.

              We believe Vogt waived its right to a jury trial. Vogt had multiple

opportunities to request a jury trial, but it failed to do so. Vogt filed its original

complaint on June 17, 2015. It then filed an amended complaint on September 26,

2016. Neither complaint requested a jury trial. Vogt’s first request for a jury trial

was in December of 2018, which was after the trial had already begun. This was

an untimely request. Furthermore, when the defendants agreed to withdraw their

jury trial demand and proceed with a bench trial, counsel for Vogt did not object or

request a jury trial.

              When trial by jury has been demanded as provided in
              Rule 38, the action shall be designated upon the docket as
              a jury action. The trial of all issues so demanded shall be
              by jury, unless (a) the parties or their attorneys of record,
              by written stipulation filed with the court or by an oral
              stipulation made in open court and entered in the record,
              consent to trial by the court sitting without a jury, or (b)
              the court upon motion or of its own initiative finds that a

                                           -11-
             right of trial by jury of some or all of the issues does not
             exist under the Constitution or Statutes of Kentucky.

CR 39.01. It is clear that Vogt waived its right to a jury trial, and a mistrial was

not warranted.

             Next, we move to the stricken witness. At the start of the trial,

Appellees requested a separation of the witnesses, and the trial court complied.

During the testimony of the first witness, one of Vogt’s witnesses, Sylvia Cureton,

entered the courtroom and heard the testimony. After the first witness was

excused, Appellees brought Ms. Cureton’s presence to the court’s attention and

moved to have her excluded from testifying. The trial court granted the motion.

Vogt later moved for a mistrial and argued that the trial court erred by excluding

the witness. As previously stated, court denied that motion.

             At the request of a party the court shall order witnesses
             excluded so that they cannot hear the testimony of other
             witnesses and it may make the order on its own motion.
             This rule does not authorize exclusion of:

             (1) A party who is a natural person;

             (2) An officer or employee of a party which is not a
             natural person designated as its representative by its
             attorney; or

             (3) A person whose presence is shown by a party to be
             essential to the presentation of the party’s cause.

Kentucky Rule of Evidence (KRE) 615.

             We find no error here.

                                         -12-
                 If the rule is invoked, exclusion of witnesses from the
             courtroom is mandatory at trial in the absence of one of
             the enumerated exceptions in exclusion of witnesses rule.
             The rationale behind the rule is the recognition that a
             witness who has heard the testimony of previous
             witnesses may be inclined, consciously or
             subconsciously, to tailor his testimony so that it conforms
             to the testimony given by other witnesses.

McGuire v. Commonwealth, 368 S.W.3d 100, 112-13 (Ky. 2012) (citations

omitted). Furthermore, without requesting to put on avowal evidence as to what

Ms. Cureton’s testimony would have been, KRE 103(a)(2), we cannot say whether

the exclusion of her testimony was overly prejudicial to Vogt as to require a

mistrial. Vogt was not entitled to a mistrial due to Ms. Cureton being excluded

from testifying.

             Finally, we will address the evidence of settlement negotiations.

During trial, Hamhed moved to introduce text messages, dated October 23, 2014,

between Mr. Hedrick and Ms. Vogt. Those messages were a discussion regarding

a payment from Hamhed to Vogt. Hamhed was requesting a final invoice from the

Army clothing contract indicating the number of pieces laundered so that it could

pay Vogt. Ms. Vogt declined to send it because she believed Vogt was owed more

money than it had been paid and she wanted to speak with her lawyer first.

Hamhed wanted to introduce these texts to show that it was not withholding

payment, but needed an invoice before it could release any payment. Vogt

objected to these texts being introduced and argued they were settlement

                                        -13-
negotiations and inadmissible pursuant to KRE 408. The trial court overruled the

objection and informed Vogt’s counsel that it could redact anything counsel

believed were settlement negotiations. Vogt’s counsel did not redact anything

from the text messages.

             We find no error here. These texts messages do not resemble

settlement negotiations. There was no offer of money or other consideration in an

attempt to compromise a claim. Ms. Vogt simply wanted her lawyer to look over

everything before moving forward. In addition, Vogt had the opportunity to redact

the text messages, but it failed to do so. Failing to avail oneself of a remedy is a

waiver of that issue. See Commonwealth v. Steadman, 411 S.W.3d 717, 724 (Ky.

2013) (stating that an issue can be waived through inaction). Vogt was not entitled

to a mistrial based on any of the issues raised in its motion.

             We will now move away from the mistrial issue and on to Vogt’s fifth

main argument on appeal. Vogt argues that the deposition testimony of Mr. Berry

went missing during trial because it is no longer in the record; therefore, the trial

court could not have reviewed it before rendering its decision. Vogt claims this

lack of evidence caused the trial court to rule against it. We find no error.

             At the time of trial, Mr. Berry was living in Florida. The parties

agreed to let Mr. Berry testify via deposition instead of requiring him to travel to

Kentucky. On the first day of trial, counsel for Vogt attempted to play the video

                                         -14-
deposition for the court; however, there was a malfunction, and it would not play.

The court indicated it would take the video and the written transcript of the

deposition and review the testimony. On the second day of trial, the court

indicated on the record that it had reviewed Mr. Berry’s testimony. Vogt presents

no evidence that the trial court did not actually review the testimony. Further,

there is no evidence that the court did not consider Mr. Berry’s testimony when

rendering its decision. There is no error.

             Vogt’s sixth claim of error is that the trial court failed to find unjust

enrichment, quantum meruit, or promissory estoppel. First, we do not believe the

unjust enrichment or quantum meruit issues were properly preserved. While they

were briefly mentioned in the complaint, there was no argument regarding them

made to the trial court. In addition, these issues were not ruled upon by the trial

court in its order finding for Appellees, and Vogt did not address these issues in its

motion to alter, amend, or vacate. An issue not raised or ruled upon in the trial

court cannot be examined by an appellate court. Fischer v. Fischer, 197 S.W.3d

98, 102 (Ky. 2006). Second, even if these issues were preserved, the trial court

held that Vogt was paid all the money it was entitled to under the oral contract;

therefore, these equitable remedies are not available. See Vanhook Enterprises,

Inc. v. Kay & Kay Contracting, LLC, 543 S.W.3d 569, 573 (Ky. 2018) (quantum

meruit is not applicable when there is a valid contract.); Bolen v. Bolen, 169

                                         -15-
S.W.3d 59, 65 n.14 (Ky. App. 2005) (a court should not use equitable remedies

when legal remedies are available.).

              As for promissory estoppel, Vogt claimed Hamhed should be

estopped from denying them full payment. The trial court held that Vogt could not

meet the elements of promissory estoppel because the promise it relied upon was

the oral contract and the oral contract was not breached.

              Promissory estoppel is described as follows: “A promise which the

promisor should reasonably expect to induce action or forbearance on the part of

the promisee or a third person and which does induce such action or forbearance is

binding if injustice can be avoided only by enforcement of the promise.” Meade

Const. Co., Inc. v. Mansfield Commercial Elec., Inc., 579 S.W.2d 105, 106 (Ky.

1979) (citation and internal quotation marks omitted). We agree with the trial

court as to this issue. The promise relied upon by Vogt was the oral contract. The

trial court found that the oral contract was not breached, a conclusion that we

affirmed; therefore, there is no detrimental reliance and promissory estoppel is not

applicable.

              Vogt’s final argument on appeal is that the trial court erred in failing

to find tortious interference of contract. Vogt claimed that Mr. Reed and Mr.

Hedrick conspired to keep Vogt from purchasing the Wash House. This

conspiracy allegedly involved Mr. Hedrick not paying out the full amount of the

                                          -16-
contract, or at least delaying the final payment due, when the clothing contract

ended. This then caused Vogt to be unable to complete the purchase of the Wash

House and Mr. Reed to purchase it.

             To prove tortious interference with a contract, Vogt has to show (1)

the existence of a contract; (2) that Mr. Reed and Mr. Hedrick knew of the

contract; (3) that Mr. Reed and Mr. Hedrick intended to cause a breach of that

contract; (4) that Mr. Reed and Mr. Hedrick’s actions did indeed cause a breach;

(5) that damages resulted to Vogt; and (6) that Mr. Reed and Mr. Hedrick had no

privilege or justification to excuse their conduct. Snow Pallet, Inc. v. Monticello

Banking Co., 367 S.W.3d 1, 5-6 (Ky. App. 2012). Here, the contract at issue was

the contract between Vogt and Mr. Gonzalez for the purchase of the Wash House.

The trial court held that Vogt did not prove that Mr. Reed and Mr. Hedrick knew

about the contract to purchase the Wash House. The court found that the first Mr.

Hedrick knew about the attempted purchase was after it had already fallen through.

We agree with the trial court.

             The evidence supports the trial court’s finding that Mr. Hedrick did

not know about the Wash House until after Vogt’s purchase agreement with Mr.

Gonzalez was terminated. Vogt was to make the final payment on the Wash House

in September of 2014. By October of 2014, the final payment had not been made,

and the purchase was terminated. In November of 2014, Mr. Reed contacted Mr.

                                        -17-
Hedrick via text message and informed him that Vogt’s attempt to purchase the

Wash House had fallen through. Mr. Hedrick’s response indicated he was unaware

Vogt tried to purchase the Wash House. Further supporting the trial court’s

conclusion is the evidence in the record showing Hamhed was trying to give Vogt

a payment in October of 2014, but Vogt would not send an invoice in order to

receive said payment. If Hamhed was trying to pay Vogt in October, then it cannot

be said that Mr. Hedrick was delaying payments to cause the Wash House

purchase to fall through. Finally, it is worth noting that Mr. Reed and Mr. Hedrick

both consistently testified that they did not know about Vogt’s attempt to purchase

the Wash House until after the deal was terminated.

                                 CONCLUSION

            Based on the foregoing, we affirm the judgment of the trial court.

            ALL CONCUR.

                                       -18-
BRIEFS FOR APPELLANT:     BRIEF FOR APPELLEES HAMHED,
                          LLC AND ERIC HEDRICK:
Myrle L. Davis
Louisville, Kentucky      Van T. Willis
                          Crystal G. Rowe
                          Alyssa C.B. Cochran
                          New Albany, Indiana

                          BRIEF FOR APPELLEES VERITAS
                          ENTERPRISES, LLC D/B/A CAFÉ
                          LAUNDRY AND MICAH REED:

                          J. Bart McMahon
                          Louisville, Kentucky

                        -19-