BARGAINS GALORE, INC. v. CITY OF LOUISVILLE
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RENDERED:
DECEMBER 22, 2005; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002491-MR
BARGAINS GALORE, INC.
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE DENISE CLAYTON, JUDGE
ACTION NO. 00-CI-006189
CITY OF LOUISVILLE
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; HENRY AND SCHRODER, JUDGES.
SCHRODER, JUDGE:
This is an appeal from a judgment valuing
items of personal property (39 boxes of cigarette rolling
papers) which disappeared while in the possession of the
Louisville Police Department, pursuant to an award of damages
for the lost property.
Appellant argues that the court erred in
valuing the property using certain documentary evidence in the
record, instead of the testimony of witnesses regarding the
property’s value.
Appellant also argues that it was entitled to
prejudgment interest on its award.
We reject both arguments and
thus affirm.
The undisputed facts of this case are set forth in the
trial court’s first opinion in this case entered on March 21,
2002:
On March 27, 1996, the Louisville
Police Department, pursuant to a valid
search warrant for Kentuckiana Lease
Department, Inc. d/b/a B-mart, took
possession of a large amount of inventory
owned by Bargains Galore, Inc. Bargains
Galore is a wholesale business and goods
were sold to customers all over the country.
The inventory that was seized was not placed
in the usual Police property room, but was
stored in a building located at 340 West
Chestnut Street, Louisville, Kentucky.
The Commonwealth Attorney’s Office and
Alvin Borowick, the owner of Bargains
Galore, entered into negotiations to resolve
this criminal matter. The resolution was
that certain confiscated items would be
returned to the plaintiffs and other items
would be destroyed. Richard Borowick, who
is the son of Alvin Borowick, is an employee
of Bargains Galore and is the primary buyer
for the corporation. The corporation
entered a guilty plea. However, this plea
was not entered until December 19, 1997,
although it is clear that the parties had
been in negotiations regarding this matter
for some time. On January 8, 1998, Richard
Borowick and the representatives from the
Police Department, including Detective David
James who testified in this matter, went to
the facility so that Mr. Borowick could
retrieve the items. However, when they
arrived at the facility, some of the
plaintiff’s inventory had been stolen.
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Bargains Galore (“BG”) filed an action against the
City of Louisville (“the City”) for the damages resulting from
its lost inventory and business records, as well as
reimbursement for delivery expenses and interest paid on a loan
that it took out to purchase replacement inventory.
The city
conceded its liability, thus the only issue for trial was BG’s
damages.
Prior to trial, the parties stipulated to the items
that had been lost and agreed that the measure of damages would
be the fair market value of the lost property.
A large part of
the lost inventory was classified in the stipulation as “39
cases of cigarette rolling papers.”
After a bench trial held on
February 13, 2002, the court entered its order awarding BG the
following:
$13,230 for lost inventory; $4,791 for shipping
expenses; $4,950 for interest; and $30,000 for lost profits from
the loss of the business records.
Both parties then appealed to this Court, BG appealing
the lower court’s valuation of the lost inventory and the City
challenging the $30,000 award for lost profits.
On February 13,
2004, the Court of Appeals rendered its opinion affirming the
$30,000 award for lost profits, and reversing as to the lower
court’s valuation of the lost inventory.
The Court of Appeals specifically rejected the lower
court’s method of valuing the lost inventory.
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The lower court
started with the $40,000 loan obtained by BG to purchase new
inventory after the loss (which presumed the loan amount was the
value of all of the seized inventory), added 17% for profit
margin ($49,000), and multiplied that figure times 27%, which
was the percentage of seized property that should have been
returned to BG, equaling $13,230.
The Court of Appeals reasoned
that using the $40,000 loan amount as a starting point was in
error because the $40,000 loan was clearly not intended to
replace all of the previous inventory (illegal and legal) but
for new inventory, and all of the confiscated merchandise was
not of equivalent value.
This Court adjudged that the evidence
as to the value of the non-rolling paper merchandise was
undisputed and thus the trial court should have found the fair
market value of those items to be $18,732.05.
As to the value
of the 39 cases of cigarette rolling papers, this Court remanded
the issue to the circuit court for re-valuation, stating:
As noted above, the City did contest the
value of the 39 cases of cigarette rolling
papers that should have been returned to
Bargains Galore. Officer James testified
that on January 8, 1998, when they
discovered that the merchandise was missing,
Richard Borowick estimated the value of the
cigarette rolling papers at between $200.00
and $600.00 a case. At trial, however,
Borowick testified that Bargains Galore paid
$1,008.00 a case for “premium” cigarette
papers, and that they would have wholesaled
for $1,154.00 a case. Although the trial
court was undoubtedly frustrated by the lack
of documentary evidence in this case, there
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was sufficient evidence of at least a range
of values for these papers.
On remand, no new evidence was submitted to the court;
the court merely reconsidered the evidence presented at the
February 13, 2002, bench trial.
In addition to the testimony of
Borowick and Officer James at the trial, as noted above, BG
presented the testimony of Michael Cardin, a regional sales
manager for a company that manufactured cigarette rolling
papers.
Cardin testified regarding the price of several brands
of rolling papers, but could not give an estimated value of the
rolling papers seized by the City in this case because he was
not aware of BG’s inventory of rolling papers.
documentary evidence was admitted.
Also, certain
Invoices of BG for the
fiscal year July 1, 1996 - June 20, 1997, reflect that BG spent
approximately $7,600 on cigarette rolling papers that year.
BG’s tax return from the fiscal year July 1, 1995 – June 30,
1996, listed its inventory value at $47,000, and then listed a
deduction of $26,150 for the “involuntary conversion” of its
property.
On remand, the trial court started with the $26,150
figure from the 1995-1996 tax return, subtracted the $18,732.05
which was the amount awarded for the non-rolling paper inventory
and arrived at a $7,423.95 value for the rolling paper
inventory.
In its order on remand entered on July 14, 2004, the
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court awarded BG $7,423.95 plus interest from March 21, 2002,
the date of its original order on the matter.
BG again appealed
to this Court.
BG first argues that the lower court again erroneously
calculated the value of rolling paper inventory.
BG maintains
that the court disregarded the language of the prior Court of
Appeals opinion when it failed to accept the testimony of
Richard Borowick, Officer James, or Michael Cardin regarding the
value of the rolling papers.
BG claims that the testimony of
those individuals was the only competent evidence on the
subject.
We disagree.
Although the parties stipulated that there were “39
cases of cigarette rolling papers”, the undisputed testimony of
Officer James revealed that the boxes of rolling papers
confiscated by the police were not of uniform size or fullness.
James testified that several kinds of boxes were used – some
large boxes from a truck rental company and some small boxes the
size of a box of Xerox paper – and some were full, while others
were only partially filled.
James also testified that there
were many different brands of rolling papers in the boxes.
In
the trial court’s initial opinion, the court found that because
the undisputed evidence was that the “cases” were not of uniform
size, brand or fullness, it could not value the rolling papers
using the testimony regarding the price of rolling papers per
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case.
Although the court found the testimony of Borowick, James
and Cardin credible, the court reasoned it could not utilize
their testimony to the extent they testified to the price of
rolling papers per case.
When the trial court is the fact finder, due regard
shall be given to the opportunity of the trial court to judge
the credibility of the witnesses, and its findings of fact will
not be disturbed unless they are clearly erroneous.
Croley v. Alsip, 602 S.W.2d 418 (Ky. 1980).
CR 52.01;
When the trial
court has before it conflicting evidence, it may choose between
the evidence and accept any part of the evidence and not the
other, as the determination of the weight and credibility of the
evidence rests exclusively with the trier of fact.
Cross v.
Clark, 308 Ky. 18, 213 S.W.2d 443, 446 (1948).
In the present case, the tax return and the invoices
of BG were properly admitted into evidence, and the court was
entitled to accept them as the most credible and accurate
evidence to determine the value of the rolling papers.
From our
reading of the prior Court of Appeals opinion, the Court did not
require the lower court to accept the testimony of Borowick or
Officer James on remand.
Rather, the Court was merely
expressing that there was more reliable evidence in the record
of the value of the rolling papers than the $40,000 loan
obtained by BG, which was the trial court’s starting point in
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the initial order.
We believe the trial court’s use of BG’s own
tax return claiming the $26,150 deduction for the involuntary
conversion of its property was a reliable measure of the value
of its entire lost inventory. 1
It follows that the $26,150
figure minus the amount BG recovered for the value of the nonrolling paper inventory would yield the value of the rolling
paper inventory.
We would note that said amount, $7,423.95, was
close to the amount BG’s 1996-1997 invoices reflected that BG
spent on rolling papers that year ($7,600) and was close to the
lowest per case estimate testified to by Officer James ($7,800).
The lower court was not required to accept the valuation of
Borowick who valued the rolling papers all at the price of
premium papers.
Nor could the court be compelled to use the
testimony of Cardin when Cardin was not aware of BG’s inventory
at the time of the seizure.
BG’s remaining argument is that it was entitled to
prejudgment interest from January 8, 1998, the date of the
seizure of the property.
The lower court awarded interest on
the award in the second judgment from the date of the original
judgment, March 21, 2002.
It has been held that prejudgment
interest is to be awarded as a matter of right only when damages
1
BG’s contention on appeal that the involuntary conversion listed on the
1995-1996 tax return was for a conversion occurring on March 1, 1996 is not
well taken. There was no evidence in the record that said deduction was for
anything other than the property seized by the City on March 27, 1996, and
the tax return clearly states that it covers the period from July 1, 1995 to
June 30, 1996.
-8-
are liquidated.
Nucor Corp. v. General Electric Co., 812 S.W.2d
136 (Ky. 1991).
Liquidated damages are damages which are
“[m]ade certain or fixed by agreement of [the] parties or by
operation of law.”
Id. at 141 (quoting Black’s Law Dictionary
930 (6th ed. 1990)).
Since the damages in the present case were
not fixed by agreement of the parties or by law, they were
unliquidated.
Prejudgment interest on unliquidated damages is
within the sound discretion of the trial court.
Id. at 142-45.
We cannot say that the trial court abused its discretion in not
awarding prejudgment interest in this case.
For the reasons stated above, the judgment of the
Jefferson Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Neil C. Bordy
Paul J. Hershberg
Louisville, Kentucky
Susan P. Spickard
Assistant Jefferson
County Attorney
Louisville, Kentucky
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