Norman "Butch" Stone and The Concert Company v. Pat Pico and Gary Gulu

ca01-799

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

JOHN B. ROBBINS, JUDGE

DIVISION IV

NORMAN "BUTCH" STONE AND THE CONCERT COMPANY

APPELLANTS

V.

PAT PICO AND GARY GULU

APPELLEES

CA 01-799

APRIL 10, 2002

APPEAL FROM THE PULASKI

COUNTY CIRCUIT COURT

[NO. CIV99-7927]

HONORABLE JOHN WARD,

CIRCUIT JUDGE

AFFIRMED

Appellees Pat Pico and Gary Gulu sued appellants Butch Stone and The Concert Company for breach of contract and fraud. Following a bench trial, the judge awarded appellees $29,212.22 on their breach of contract claim and $22,500 on their fraud claim, plus $150,000 in punitive damages. On appeal, appellants challenge the finding of fraud and the imposition of punitive damages. We affirm.

In 1999, appellant Butch Stone, as president of The Concert Company, produced five outdoor concerts at Little Rock's Riverfront Amphitheater: dc talk, Journey/Foreigner, Hootie and the Blowfish, Willie Nelson, and a blues concert. Appellee Pat Pico, either with others or with appellee Gary Gulu, provided Stone with $195,000 as "advance funding" for the events. In return for their investment, appellees were to receive a percentage of the net proceeds generated by each event. Net proceeds were calculated as gross proceeds from

ticket sales, merchandise sales, etc., less taxes and expenses. From those net proceeds, appellees would first recoup their investment, then their agreed-upon percentage. Additionally, appellees and Stone agreed that, on four of the concerts, appellees would receive a share of beer sales.

According to Stone's accounting records, three of the five concerts -- dc talk, Hootie, and the blues show -- did not produce sufficient revenue to cover expenses; therefore, appellees lost their investment on those shows. On the other two concerts --Journey/Foreigner and Willie Nelson -- revenues exceeded expenses by $79,212.22. The trial judge ruled that appellees were entitled to that amount as partial recoupment of their investment.1 Because Stone had already paid appellees $50,000, the judge awarded them an additional $29,212.22, as damages for breach of contract. There is no challenge on appeal to that award.

Appellees' fraud claim was based on the allegation that Stone skimmed money from concert beer sales, thus depriving appellees of their rightful share of those sales. At trial, two of appellants' former security guards, Mark Coleman and Ed Hill, testified that appellants kept quantities of beer in an underground storage area near Riverfront Park. Hill testified that, instead of the accounted-for beer that came from distributors' trucks, beer was brought out of the storage area to sell. Further, both he and Coleman testified that, during the course of a concert, Jerry Citti, the concessions manager, would take collection pouches gatheredfrom the beer-selling sites down to the storage area, where he would remove money from them. According to Hill, Citti would give the money to him, and he would give it to Stone. Hill further testified that, before each concert, Stone would inform him of how much money he wanted off the top from the beer sales. According to Hill, Stone requested $18,500 from the Journey/Foreigner show; $15,000 from the Willie Nelson show; $8,000 from the Hootie and the Blowfish show; and $3,500 from the blues show, for a total of $45,000. Hill unequivocally testified that he and Citti "helped Stone steal beer money."

Jerry Citti denied any wrongdoing. He claimed that when he took money from the beer-sale pouches, he was merely reimbursing himself for start-up change. However, he gave no receipt for such reimbursement and he further testified that, after each show, the sales records from the beer-selling sites were destroyed. Stone and his show accountant, Larry Paladino, also denied that any skimming had occurred. Further, Bryan Day, the director of Little Rock's Department of Parks and Recreation, testified that he did not believe that any theft of beer proceeds had occurred.

Following a trial that featured the testimony of several witnesses and numerous complex exhibits, the court issued a letter opinion, which stated in pertinent part:

The Court believed the testimony of Mark Coleman, who was an insider in Stone's organization, and acted as Stone's bodyguard and head of security at Stone's concerts. Coleman detailed how the official beer counts were an illusion, in that Stone kept a separate supply of beer that he did not account for to the City, or investors. He further claimed that Stone had his people skim profits from beer sales, usually a minimum of $5,000. The amount of $18,500 was skimmed on the Journey show, $8,000 on Hootie, $15,000 on Nelson, and $3,500 on Blues.

. . . .

The Court finds that Butch Stone defrauded the plaintiffs, and as a result, owes them $22,500 [one-half of the above skim totals] on beer sales for which Stone skimmed money.

. . . .

For his fraud, the Court finds Mr. Stone should pay the sum of $150,000 in punitive damages to plaintiffs.

When the court entered the final judgment approximately two months later, the name "Mark Coleman" in the opinion letter was corrected to that of Ed Hill, who actually gave the testimony referred to.

Appellants argue first that there was not sufficient evidence to support a verdict for fraud. This case was tried to the circuit court sitting as factfinder. Therefore, we will not reverse the court's findings unless they are clearly erroneous. Ark. R. Civ. P. 52(a); and see Burke v. Elmore, 341 Ark. 129, 14 S.W.3d 872 (2000). Findings are clearly erroneous when, although there is evidence to support them, we are left, on reviewing the entire evidence, with the firm conviction that a mistake has been committed. See Betts v. Betts, 326 Ark. 544, 932 S.W.2d 336 (1996).

Fraud consists of some deceitful practice or willful device resorted to with the intent to deprive another of his rights or in some manner to do him injury. Mid-Continent Life Ins. Co. v. Hill, 192 Ark. 667, 94 S.W.2d 364 (1936). The elements necessary to prove fraud or deceit are: 1) a false representation of a material fact; 2) knowledge that the representation is false or that there is insufficient evidence on which to make the representation; 3) intent to induce action or inaction in reliance on the representation; 4) justifiable reliance on therepresentation; and 5) damage suffered as a result of the reliance. Stine v. Sanders, 66 Ark. App. 49, 987 S.W.2d 289 (1999). In a case at law, fraud must be proved by a preponderance of the evidence. Lancaster v. Schilling Motors, Inc., 299 Ark. 365, 772 S.W.2d 349 (1989).

Appellants argue that they had an accounting system in place that would have prevented the skimming of beer money. However, given the testimony of Hill and Coleman, it was not impossible for the skimming to have occurred, despite the presence of an accounting system. Appellants also argue that Ed Hill was a disgruntled former employee whose testimony should be disregarded. The trial judge expressly stated that he believed Hill (even though in his opinion letter, he confused Hill with Mark Coleman). In a case involving deceit, the credibility of the witnesses is vital in determining liability, and the trier of fact is the sole judge of the weight and credibility of the evidence. Stine v. Sanders, supra. A trial judge's finding regarding credibility is usually conclusive. See Firstbank of Arkansas v. Keeling, 312 Ark. 441, 850 S.W.2d 310 (1993). Based on the foregoing, we hold that the trial judge's finding of fraud is not clearly erroneous.

Appellants argue next that the award of punitive damages should be reversed. They claim first the trial judge imposed punitive damages without using any method to calculate the amount of damages, thus violating their constitutional right to due process. Appellants cite BMW of America v. Gore, 517 U.S. 559 (1996), in which the U.S. Supreme Court held that, while states have an interest in using flexible standards to award punitive damages, when an award is grossly excessive in relation to the state's interest, it may violate the due process clause.

The record does not reveal that this constitutional argument was made to the trial court. A constitutional argument regarding punitive damages is waived if made for the first time on appeal. See United Ins. Co. v. Murphy, 331 Ark. 364, 961 S.W.2d 752 (1998). In any event, if we were to reach this issue, we would uphold the award. In reviewing punitive damage awards, we consider the enormity of the wrong, the intent of the party committing the wrong, all the circumstances, and the financial and social condition of the defendant. Routh Wrecker Serv., Inc. v. Washington, 335 Ark. 232, 980 S.W.2d 240 (1998). We review the proof and all reasonable inferences therefrom in the light most favorable to the appellees, and we determine whether the award is so great as to shock the conscience of the court or demonstrate passion or prejudice on the part of the trier of fact. Id. Additionally, using the BMW v. Gore analysis, we consider whether the punitive award is excessive in light of the defendant's conduct and as compared with the compensatory damage award. Id. Considering the trial judge's findings that appellants engaged in deliberate conduct calculated to steal money from appellees, engaged in other egregious conduct such as instructing security officers to carry weapons to intimidate investors, and that the ratio of the punitive damages in relation to the compensatory damages was not excessive (6.67 to 1), we see no constitutional violation.

Appellants also argue that there was not sufficient evidence of malice or conscious indifference to justify an award of punitive damages. Punitive damages are a penalty for conduct that is malicious or done with the deliberate intent to injure another. Routh Wrecker Serv., Inc. v. Washington, supra. Malice does not necessarily mean hatred; it is rather anintent or disposition to do a wrongful act greatly injurious to another. See Fuqua v. Flowers, 341 Ark. 901, 20 S.W.3d 388 (2000).

The fraud found by the trial judge in this case is the type that was intended to cause injury to another. The judge found that appellants mishandled proceeds that they were contractually-bound to share with their investors and effectively stole $22,500 from appellants. See Firstbank of Arkansas v. Keeling, supra (holding that where there is substantial evidence of deliberate misrepresentation, fraud, or deceit, the issue of punitive damages may be submitted to the factfinder). Further, there is only one type of fraud - intentional fraud. We do not recognize a cause of action for negligent misrepresentation. South County, Inc. v. First Western Loan Co., 315 Ark. 722, 871 S.W.2d 325 (1994).

Next, we address appellants' argument that the trial judge erred in denying their motion for a new trial on the basis of newly discovered evidence. The new evidence in question was an investigative report issued after trial by the Little Rock Police Department concerning claims that Butch Stone had skimmed profits from beer sales and had made threats against a city director. The detective in charge of the investigation, Fred Lee, concluded that Stone had been guilty of no wrongdoing and further concluded that Ed Hill was not a truthful witness.

To reach this conclusion, Lee relied on interviews with Stone, Jerry Citti, Ed Hill, and Bryan Day of the city parks department. He also compared the records of the beer distributors with records from Jerry Citti and the City of Little Rock for the Willie Nelson concert, and all of the records matched up. Further, Lee stated in an affidavit that he viewedthe storage room where extra beer was allegedly stored and concluded that it would be unrealistic to think that the amount of beer alleged to have been surreptitiously stored there could have been brought out for sale without attracting notice. Finally, Lee stated that even though Ed Hill was supposed to have a tape of Stone threatening the city director, the tape contained no such threats.

Appellants argue that a new trial should have been granted because the matters contained in the investigative report "went directly to the credibility of the sole witness [Ed Hill] who testified that Mr. Stone stole beer money," and that "had any of the above findings of the Little Rock Police Department been available at the time of trial, Mr. Hill's credibility would have been challenged through cross-examination."

A new trial may be sought on the basis of newly discovered evidence material for the party applying, which he could not, with reasonable diligence, have discovered and produced at trial. Ark. R. Civ. P. 59(a)(7). A new trial based on newly discovered evidence is not a favored remedy, and whether to grant a new-trial motion on such a ground is within the sound discretion of the trial court. Virginia Ins. Reciprocal v. Vogel, 73 Ark. App. 292, 43 S.W.3d 181 (2001). Further, the burden is on the movant to show that 1) he could not with reasonable diligence have discovered and produced the evidence at the time of the trial; 2) that the evidence is not merely impeaching or cumulative; and 3) that the testimony would have changed the result of the trial. Id. We will not reverse a trial court's denial of a new trial on the basis of newly discovered evidence unless it appears that the court abused its discretion. Roetzel v. Brown, 321 Ark. 187, 900 S.W.2d 185 (1995).

We find no abuse of discretion in the trial court's denial of a new trial because the newly discovered evidence offered by appellants was merely impeachment evidence. The trial judge based his finding of fraud on the testimony of Ed Hill and the testimony of Mark Coleman, two security officers who worked for appellants. The police investigation seriously impeached Hill's credibility, but did little else. What appellants have presented is not newly discovered fact evidence, but newly discovered opinion evidence. That opinion serves only to contradict the testimony of trial witnesses. As such, it is not the type of newly discovered evidence that warrants a new trial. See generally Lee v. Lee, 330 Ark. 310, 954 S.W.2d 231 (1997) (holding that where new information could only impeach trial testimony, new trial not granted).

Appellants' last argument is based on the following finding contained in the trial court's letter opinion:

The Court was very disturbed by the testimony of [Donnie] Frizzell. At one time, he was at great enmity with Stone, and had intervened in this suit against Stone, claiming Stone owed him money for the subject concert. Yet his testimony was abruptly friendly towards Stone. Clearly, Stone compensated Frizzell with plaintiffs' money to make a friendly witness of him. The court is reporting the incident to the Pulaski County Prosecutor.

Frizzell was a former partner of appellant Stone's. During the 1999 concert season, he booked the talent for Stone. After appellees filed this lawsuit, Frizzell intervened, alleging that he was owed money by Stone and asserting claims for fraud and breach of contract. However, he later dismissed his intervention and eventually offered testimony at trial that was favorable toward Stone.

Appellants argue that the above finding "clearly indicates a lack of objectivity and bias toward appellants" and that the finding is clearly erroneous. There is no reversible error on this point. First, although the finding was contained in the trial court's letter opinion, it was not contained in the final judgment. A judgment is not effective until entered. See generally Morrell v. Morrell, 48 Ark. App. 54, 889 S.W.2d 772 (1994); Ark. R. Civ. P. 58. Secondly, the finding is superfluous to the issues in the case, and no purpose would be served by reversing such a finding. See McNamara v. Bohn, 69 Ark. App. 337, 13 S.W.3d 185 (2000).2

In light of the forgoing, we uphold the judgment of the trial court.

Affirmed.

Hart and Baker, JJ., agree.

1 On the two shows that resulted in profits, appellees had invested $90,000.

2 Appellants make reference to the fact that the trial court's judgment differed in some respects from its letter opinion. However, there is no showing that the court made a mistake or set forth any findings in its judgment other than what was intended.