Jenkins v. CST Timber Co., No. 96-CA-00958-SCT.

761 So.2d 177

J. Marty JENKINS, Carlo M. Santangelo and First Bank v. CST TIMBER COMPANY, J. Alan Priest and Renee Bickham Priest and CST Timber Company, J. Alan Priest and Renee Bickham Priest.

CST Timber Company, J. Alan Priest and Renee Bickham Priest and CST Timber Company, J. Alan Priest and Renee Bickham Priest v. J. Marty Jenkins, Carlo M. Santangelo and First Bank.

No. 96-CA-00958-SCT.

Supreme Court of Mississippi.

June 8, 2000.

T. Mack Brabham, McComb, Dennis L. Horn, Madison, Attorneys for Appellants/Cross-Appellees.

Gregg L. Spyridon, Metairie, Attorney for Appellees/Cross-Appellants.

EN BANC.

McRAE, Justice, for the Court:

¶ 1. This is a case in which the plaintiffs sued for failure to pay employment commissions. The defendants countered that the plaintiffs owed them for lost profits as a result of plaintiffs' allegedly fraudulent activities. The jury awarded damages to both plaintiffs and defendants. However, because the trial court erroneously excluded expert testimony on both sides, we reverse and remand for a new trial.

¶ 2. On May 4, 1994, J, Marty Jenkins and Carlo M. Santangelo filed suit against CST Timber Company, J. Alan Priest, and Renee Bickham Priest for breach of an employment agreement demanding payment of unpaid commissions on timber and timberland purchases. CST filed a counterclaim against Jenkins and Santangelo for past lost profits as a result of allegedly fraudulent activities. CST, et al., eventually amended their counterclaim to include First Bank as a counter-defendant, contending that the bank not only knew of fraudulent activities and failed to disclose them to CST, but also that the bank actively participated in the fraud, thus breaching fiduciary duties and the duty of confidentiality, good faith, and fair dealing to CST. First Bank then filed a claim against CST and the Priests, seeking damages for failing to apply proceeds from the sale of timber on loans secured by the timber (being "out-of-trust").

¶ 3. After extensive discovery and pretrial maneuvering, this matter went to trial on June 3, 1996, in the Circuit Court of Amite County and lasted a full three weeks. The jury returned a verdict for Jenkins in the amount of $21,929.92 and for Santangelo in the amount of $11,008.62 against CST. CST and the Priests received a verdict against Jenkins and Santangelo for $24,140.15. A defense verdict was returned for First Bank. Judgment was entered accordingly. Now all parties appeal and cross-appeal.

¶ 4. Having read the transcript and the briefs of the parties, we sympathize with the trial court. The parties, it seems, were unable to see the forest for the trees. Notwithstanding the obstacles provided by the briefs, we have been able to conclude as follows: finding no reason to warrant reversal of the verdict for the Bank, we affirm with respect to First Bank. However, we find that the trial court erred in excluding expert testimony for both Jenkins/Santangelo and for CST and thus reverse and remand for a new trial as to these parties. Given that reversal on these issues will require a new trial, we discuss only those issues on which we reverse.

FACTS

¶ 5. Marty Jenkins began working for CST, owned by Alan and Renee Priest, in 1990 as a timber buyer and eventually was promoted to operations manager. With Jenkins's assistance, Santangelo began working for CST in 1992 as a timber buyer as well. Both Jenkins and Santangelo initially would be paid according to commissions earned on purchases of timber tracts. In 1992, Alan Priest, Jenkins and Santangelo decided that they would buy timberland as well, if it were profitable to do so, with Jenkins and Santangelo each receiving twenty percent commissions on purchases, and the remaining sixty percent going to CST. Jenkins alleges that Alan Priest also agreed to pay him a five percent override for the hiring and training of new buyers (like Santangelo), based on the new buyer's net profits.

¶ 6. This arrangement worked smoothly until about March of 1993. What followed was a heated dispute as to amounts of money owed and allegations of fraud and interference with contracts. Jenkins alleges that CST owes him unpaid commissions on Santangelo's sale of a tract from which CST made $90,000 profit. Apparently, Santangelo received his commission, but Jenkins never received his twenty percent commission, $18,000. Jenkins alleged that Alan Priest promised to pay this money later, but never did pay him. Jenkins also claimed to not have been paid his five percent override on the Santangelo tract. Jenkins alleged that he was owed commissions on the Talmadge and Wilkinson tracts as well, along with money promised him for assistance with the construction of the Priests' home.

¶ 7. Jenkins claims that, after Alan Priest found out how much he made on the sale of the Dickerson tract, Priest told him that he could not buy any more timber or timberland on his own. Jenkins says that after he and Santangelo threatened to quit, Alan Priest changed his mind and said they could make purchases with his blessing. Jenkins then claims that he and Alan agreed that any purchases he made would be in his name, and the tracts would be transferred to CST when he received the money owed him.

¶ 8. After Alan Priest refused to buy the Mike's Island tract, Santangelo quit, followed by Jenkins. They claim that when they quit, they were still owed unpaid commissions.

¶ 9. On the other hand, CST claims that Jenkins and Santangelo, with the help of Benoyd Bell, a loan officer at First Bank, defrauded them by engaging in activities that were detrimental to CST, while Jenkins and Santangelo were still employed by the company. CST alleges that Jenkins and Santangelo had solicited, negotiated and purchased timber and timberland for their own personal use and to the detriment of CST, namely the Amacker tracts. CST also alleges that Bell financed these purchases through First Bank, knowing that the purchases would be detrimental to CST. CST claims that Jenkins, Santangelo and Bell did the same thing for other Amacker tracts and a Hudson tract. ¶ 10. CST also claims that Jenkins engaged in check kiting, sanctioned by Bell, that Bell violated First Bank's internal loan policies by making loans to Jenkins and Santangelo, and that First Bank, through Bell's actions, knowingly assisted Jenkins and Santangelo in committing fraudulent activities adverse to CST, thus breaching the alleged fiduciary duty and duty of good faith and fair dealing owed by First Bank to CST.

The court erred in excluding testimony related to the issue of punitive damages and erred in failing to allow plaintiffs to proceed to the jury on the issue of punitive damages.

¶ 11. Punitive damages are allowable in cases of gross negligence, Mutual Life Insurance Co. of New York v. Estate of Wesson by Hall, 517 So.2d 521 (Miss. 1987); punitive damages are allowable for oppressive and intentional misconduct, Defenbaugh and Co. of Leland, Inc. v. Rogers, By and Through Thompson, 543 So.2d 1164 (Miss.1989); punitive damages are allowable for battery, Strickland v. Rossini, 589 So.2d 1268 (Miss.1991). However, punitive damages are not recoverable if no actual damages are allowed. Herrington v. Spell, 692 So.2d 93, 104 (Miss.1997).

¶ 12. The trial court must decide whether the party requesting punitive damages has introduced evidence sufficient to warrant a punitive damage instruction. United States Indust., Inc. v. McClure Furniture Co., 371 So.2d 391, 393 (Miss. 1979). On appeal, this Court must look at the elements of the punitive damages and decide whether, under the totality of the circumstances and viewing the defendant's conduct in the aggregate, a reasonable, hypothetical trier of fact could have found either malice or gross neglect/reckless disregard. Colonial Mortgage Co. v. Lee, 525 So.2d 804, 808 (Miss.1988).

¶ 13. Relying on Hans Constr. Co. v. Drummond, 653 So.2d 253 (Miss.1995), Jenkins and Santangelo argue that there were numerous instances where other employees of CST had promises broken to them repeatedly and were not paid for their services. As a result, they claim that such testimony was admissible, specifically because they alleged punitive damages. This Court noted in Drummond that because "Drummond also sued [Hans Construction] for punitive damages based on an allegedly bad faith failure to pay, evidence which tended to prove that Hans/Offshore had a routine practice of bad faith dealings with other companies became important and, under Rule 401 and Rule 406, relevant." Drummond, 653 So.2d at 265.

¶ 14. Jenkins and Santangelo concede that they were able to get into...