Silver Dollar Sales, Inc. v. Battah

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SILVER DOLLAR SALES, INC. APPELLANT v. MICHAEL BATTAH APPELLEE

No. 2022-CA-00476-COA

Court of Appeals of Mississippi

January 23, 2024

DATE OF JUDGMENT: 05/02/2022

COURT FROM WHICH APPEALED: DESOTO COUNTY CIRCUIT COURT HON. CELESTE EMBREY WILSON TRIAL JUDGE:

ATTORNEYS FOR APPELLANT: GRADY F. TOLLISON JR. TAYLOR HAMILTON WEBB DANIEL HUDSON SPARKS

ATTORNEY FOR APPELLEE: RICHARD D. UNDERWOOD

EN BANC

WILSON, P.J.

¶1. Randy Sparks owns Silver Dollar Sales Inc. (Silver Dollar), a Mississippi wholesaler that primarily buys and sells salvaged, out-of-date, discontinued, and other discounted groceries. Sparks also owns TBS Traders Inc. (TBS). TBS provided financing to River City Traders Inc. (River City), a Mississippi grocery wholesaler owned by Scott Olson. In January 2008, River City went out of business, defaulted on its debts to TBS, and caused Silver Dollar and TBS to incur substantial losses. TBS later assigned its claims against Olson and River City to Silver Dollar.

¶2. In 2010, Silver Dollar sued Olson for breach of contract fraud, and other torts alleging that Olson was personally liable for River City's debts and other damages. The complaint also asserted claims against "John Does 1-10," alleging that unknown individuals or entities had conspired to maliciously interfere with Silver Dollar's business relationship with River City and Olson. In 2016, Silver Dollar amended its complaint to substitute Michael Battah for "John Doe 1." Battah is a Texan who is also in the wholesale grocery business. One entity that Battah owned, QQB Factors LLC (QQB), did business with River City for two or three months in late 2007, shortly before River City went out of business.

¶3. A jury trial was held in April 2022 in the DeSoto County Circuit Court. At the close of Silver Dollar's case-in-chief, the court granted Battah's motion for a directed verdict. The trial then proceeded to verdict, and the jury returned a verdict against Olson, finding that Olson had committed fraud and that Silver Dollar had sustained damages of $6,618,461.71. The jury also awarded Silver Dollar punitive damages in the amount of $250,000.^[1] Olson did not file any post-trial motions or appeal. However, Silver Dollar filed a notice of appeal from the grant of a directed verdict and final judgment in favor of Battah.

¶4. On appeal, Silver Dollar argues that the circuit court erred (1) by granting Battah's motion for a directed verdict as to Silver Dollar's claim for tortious interference with business relations, (2) by sustaining a hearsay objection to an inventory that a nonparty consultant conducted at River City's warehouse, and (3) by "failing to control the courtroom" in response to objections by Battah's counsel. For the reasons explained below, the circuit court did not err by granting Battah's motion for a directed verdict because Silver Dollar presented insufficient evidence to support its claim against Battah. Therefore, we affirm the judgment of the circuit court. We do not address Silver Dollar's second and third issues because they do not affect our resolution of the first issue, which is dispositive.

FACTS AND PROCEDURAL HISTORY

¶5. In the mid-1990s, Olson and two other men formed River City a wholesale grocery supplier in DeSoto County. In September 1995, one of Sparks's companies, TBS, began providing financing to River City. TBS secured a line of credit from a bank, which River City could use to purchase grocery products for sale to retailers or other wholesalers. River City paid TBS a fee for the use of the funds.^[2]

¶6. In 2001, River City declared bankruptcy. TBS was a large creditor of River City. To resolve TBS's claims and maintain the financing TBS provided, River City executed two promissory notes in favor of TBS, and the parties entered into a settlement agreement and a "Sales and Consignment Agreement" (Consignment Agreement). A promissory note for $1,320,000 required River City to make monthly payments of $7,500 plus interest for ten years, with the balance of the principal due after ten years. A promissory note for $512,397.03 required River City to make interest-only payments for ten years with the principal due after ten years. The parties' Consignment Agreement included the following terms:

• TBS would maintain a line of credit of at least $4,000,000 for River City to buy inventory;^[3]

• the inventory ("consigned products") would be the property of TBS until sold;

• all sales proceeds would be paid directly or remitted immediately to TBS;

• River City would receive compensation or a "commission" equal to the difference between gross sales proceeds and the cost of goods sold;

• River City would pay TBS a "charge" equal to three percent per annum of the average daily balance of the cost of inventory and accounts receivable;

• River City's borrowing under the line of credit would not exceed the combined balance of its inventory and accounts receivable by more than $60,000;

• River City would maintain accurate records of inventory and sales and provide such records to TBS upon request;

• River City would permit TBS or its representatives to inventory the consigned products at reasonable times.

¶7. Under the Consignment Agreement, River City primarily utilized TBS's credit to buy groceries wholesale from unaffiliated third parties. However, River City purchased approximately twenty percent of its inventory from Silver Dollar. On those purchases, Silver Dollar would earn a profit, and TBS would earn a three percent charge or fee under the Consignment Agreement.

¶8. By 2004, Olson was River City's sole owner.^[4] In February 2006, unbeknownst to TBS, River City began receiving payments directly from Albertsons, a grocery store chain, and failed to remit those payments to TBS. Between February 2006 and November 2007, River City received and retained payments from Albertsons totaling approximately $1,166,633.14. Under the Consignment Agreement, those payments should have been paid directly or remitted to TBS. During discovery in this case, Sparks determined that River City had received an additional $686,854.62 in payments from other customers that should have been paid directly or remitted to TBS.

¶9. At some point in 2006, River City missed "a couple of" payments to TBS under the promissory notes but later "caught back up." Around September 2007, Olson talked to Sparks about "a guy out in Texas," Battah, who was interested in providing additional financing to River City.^[5] Olson told Sparks that Battah had offered to provide River City an additional $2,000,000 in credit in exchange for "$120,000 a year that would be paid [to Battah] as compensation." Olson knew Battah because River City had regularly purchased merchandise from one of Battah's companies. Sparks told Olson that he was against the proposal because he did not believe that Olson could generate enough profit off of the additional financing to justify the payment to Battah.^[6] ¶10. Later in September 2007, River City and one of Battah's companies, QQB, entered into an informal arrangement that was never reduced to a written contract. Under this arrangement, QQB paid River City $2,418.45 per month to lease a fenced-in area of River City's warehouse. QQB then purchased up to $1,000,000 in "top shelf" groceries to be stored in the fenced-in area. Battah and Olson clearly anticipated that River City would purchase most or all of the groceries that QQB purchased. However, the groceries remained QQB's property until they were sold to River City, and QQB remained free to sell to other customers. QQB did not extend credit to River City, and River City had to pay in advance to obtain product from QQB. Olson testified that he and Battah "collaborated" and discussed what types of merchandise QQB should purchase.^[7]

¶11. When River City had funds available, it would buy merchandise from QQB, which profited by selling the product to River City at a markup. However, Battah quickly realized that River City was not buying as much product as he had anticipated. Battah grew frustrated because QQB was not making money, and he "negotiated" with Olson for River City to pay certain expenses involved in his operation. QQB invoiced River City for expenses including interest, phone charges, an alarm system, and an accountant's salary.

¶12. Within about two months, Battah realized that QQB's arrangement with River City was not going to be profitable because River City was not buying much product. Because River City's funds were limited, Olson requested that QQB sell River City individual "pallets" of merchandise, which were about one-thirtieth of the "truckload" quantities Battah was accustomed to selling. Battah was uninterested in making such sales. As a result, in late November or early December 2007, QQB sold its remaining inventory to other parties and closed its business.

¶13. Throughout 2007, Sparks regularly questioned Olson about River City's financial condition, inventory, and accounts receivable. TBS's bank required River City to maintain a combined balance of inventory and accounts receivable (referred to as its "borrowing base") that exceeded TBS's total borrowing under the line of credit. Olson continually assured Sparks that River City was in good financial condition and had an adequate borrowing base. On September 26, 2007, Olson told Sparks that River City's sales and gross profits were "better than they[ had] been in over 2 years." On November 16, 2007, Olson represented to Sparks that as of the close of business on August 31, 2007, River City's accounts receivable totaled $1,402,707.69, and its inventory totaled $3,197,204.66. Olson provided supporting documentation for the inventory figure. Based on Olson's representations, the combined balance...