Bacon & Associates, Inc. v. Rolly Tasker Sails (Thailand) Co.

Citations: 841 A.2d 53; 154 Md. App. 617; 2004 Md. App. LEXIS 6Docket: 0067, Sept. Term, 2003

Court: Court of Special Appeals of Maryland; January 29, 2004; Maryland; State Appellate Court

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Bacon Associates, Inc. and Merilyn "Dixie" Bacon appeal a jury verdict from the Circuit Court for Anne Arundel County favoring Rolly Tasker Sails (Thailand) Co. Ltd. The appellants argue for reversal on four grounds: 

1. **Verdict Sheet Issues**: They claim the jury verdict should be overturned due to inconsistencies, contradictions, and clerical errors in the verdict sheets.
2. **Damages Award**: They contend the jury improperly awarded $54,000 in administrative damages, which they argue was not legally permissible or supported by evidence.
3. **Jury Instructions**: They assert the court provided erroneous jury instructions concerning the statute of limitations applicable to breach of contract claims.
4. **Evidence Admission**: They argue the court mistakenly allowed evidence regarding claims from related companies that were not parties to the case.

The appellee contends that the appeal was filed late. The court ultimately decided to address the merits of the appeal and affirmed the lower court's judgment.

The background includes Mr. Tasker's establishment of Rolly Tasker Sails Pty. Ltd. in 1956, operations in Hong Kong starting in 1963, and subsequent movements to Australia and Thailand. The business relationship with Bacon began in 1971 with an oral consignment agreement, continuing through several shipments and payments made to various Tasker entities, with no objections from Bacon regarding the arrangements made over the years.

RTS Hong Kong transferred account documents to RTS Australia without receiving monetary compensation, and RTS Australia similarly transferred documents to RTS Thailand without compensation. Under a consignment arrangement, Tasker entities shipped sails to Bacon, who would inspect, catalog, and set retail prices for these sails. When a sail sold, Bacon would mark it as "sold," and after a ten-day inspection period, issue a payment to the consignor. Initially, payments were sent directly to Mr. Tasker's facility, but later Bacon deposited the payments into the Alex Brown Account, notifying consignors with itemized stubs. The difference between the net invoice price and retail price represented Bacon's gross profit. After a shipment in March 1998, disputes arose, leading RTS Thailand to file a complaint on June 29, 2001, alleging breach of contract, quantum meruit, unjust enrichment, breach of bailment agreement, trover and conversion, and constructive fraud, claiming non-payment since July 1998. Bacon denied the allegations and raised defenses, including limitations. During litigation, Bacon returned two shipments valued at $72,269.75 and $1,000. The jury ultimately found against Bacon and Mrs. Bacon, awarding RTS Thailand $345,327 in damages and $78,660 in interest. Bacon and Mrs. Bacon appealed the decision. The appeal's timeliness was challenged by RTS Thailand, noting that the jury's verdict was rendered on December 19, 2002, and judgments were entered on December 24. Appellants filed a motion for judgment on January 6, 2003, with the court revising the judgments on February 10, 2003. The final judgment against Bacon was amended on March 6, 2003, and the notice of appeal was filed on March 20, 2003, within thirty days of this order.

Appellee contends that appellants' post-judgment motion to revise, filed beyond the ten-day limit following the December 24, 2002 judgment, should be treated solely under Maryland Rule 2-535(a), allowing the appeal period to remain active. However, appellants reference Gluckstern v. Sutton, affirming that their appeal is timely because a properly filed motion to revise, if unresolved before an appeal, allows a revised judgment to take effect as the final judgment. Maryland Rule 2-535(a) permits the circuit court to revise a judgment within thirty days, meaning if the court revises the judgment and no appeal has been filed, the revised judgment supersedes the original. Since the notice of appeal was filed within thirty days of the revised judgment, it is valid.

Appellants also argue for reversal based on "confusion" from verdict sheets containing inconsistencies and clerical errors. The court typically does not alter jury verdicts, even inconsistent ones, unless they are irreconcilably defective. An example provided is when answers in a special verdict form contradict each other, necessitating intervention. The original verdict sheet presented several questions regarding whether RTS Thailand was entitled to collect sums from the defendants, findings on breach of contract, conversion, and fraud, as well as the amounts of damages awarded. Specific numbers for damages were also listed, raising further questions on the validity of the verdict.

Rolly Tasker Sails (Thailand) Co. Ltd. was evaluated for damages prior to June 29, 1998, with the court issuing a Supplemental Verdict Sheet to clarify the jury's intent following an initial verdict. The jury ultimately awarded $345,327 to RTS Thailand, while RTS Hong Kong and RTS Australia received no damages. The total award, combining amounts from both verdict sheets, was $423,987. The court found the jury's intent clear and consistent regarding these damages, dismissing the appellants' claims of inconsistency. The appellants failed to object to the wording of the verdict sheets at trial, thereby waiving their right to challenge it on appeal. Additionally, the appellants argued that the $54,000 awarded was for "administrative damages," which lacked legal support; however, the jury did not clarify this term and assured the court they understood its instructions. The focus remained on the evidence supporting the actual damages awarded to RTS Thailand, which totaled $345,327.

The evidence reviewed shows that RTS Thailand, as the prevailing party, has sufficient grounds to support the verdict regarding the consigned sails. The total value of these sails, measured by net invoice price, is broken down as follows: $727,406.64 for sails consigned from 1971 to May 1998, $41,589.00 for those consigned from June 1998 to October 2001, and a cumulative total of $768,995.64. Payments made on the earlier account totaled $375,106.74, while miscredits accounted for $1,024.00 and $11,273.20 respectively. The total value of unsold sails before returns is $404,504.10, with returns valued at $72,269.75 and $1,000.00 for two shipments. After adjustments and credits, the net value of consigned sails amounted to $346,234.35. Each appellee was held liable for the conversion of sails that were neither returned nor paid for, with evidence supporting a fair market value of the converted sails exceeding the jury's verdict of $345,327 before interest.

Regarding the statute of limitations, the jury was instructed that the plaintiffs' claims must be filed within three years of the alleged wrong. The suit was initiated on June 29, 2001. If a party is unaware of injury at the time of the wrong, the cause of action accrues once they should reasonably have learned of the damage. If the plaintiffs were aware of any payment due before June 29, 1998, they could not recover those amounts. The appellants raised exceptions to the limitations instruction, arguing that the jury should have been informed that the burden of proof for the discovery rule is clear and convincing, and that the discovery rule does not apply to breach of contract claims, which have a three-year limitation from the date of breach. They referenced the case Finch v. Hughes Aircraft Co., where claims were barred if they arose more than three years prior to the filing of the suit at law.

The court clarified that under Maryland law, a plaintiff invoking the discovery rule to avoid a statute of limitations defense does not need to prove the timing of discovery by clear and convincing evidence; the standard is simply preponderance of the evidence. The appellants argued that the circuit court failed to instruct the jury that the burden was on RTS Thailand to demonstrate that it should have discovered the alleged wrongs more than three years before the lawsuit was filed. However, the court noted that a party must specifically object to jury instructions immediately after they are given to preserve any claims of error. Since the appellants did not request instruction on the burden of persuasion regarding the discovery rule, this argument was not considered. 

Regarding the second exception, the court rejected the appellants' assertion that the discovery rule does not apply to breach of contract claims, stating that this argument was based on a misunderstanding of the Bragunier Masonry Contractors case. In that case, it was established that the cause of action accrues when the breach occurs, not when it is discovered, unless there is fraud involved. The court emphasized that, absent fraud, limitations begin to run from the date of breach, aligning with the principles outlined in the cited case law.

The discovery rule established in Poffenberger v. Risser is applicable to tort actions but not to breach of contract cases. Specifically, for garnishment proceedings related to a breach of contract for non-payment, the discovery rule does not apply. The Court of Appeals determined that the cause of action for unpaid contract price arose when the garnishee failed to remit payment upon completion of the contract. It stated that when both the breach and the discovery occur simultaneously, the discovery rule is fulfilled. In this context, the debtor was aware of non-payment after the contract completion, indicating that they had 'discovered' any breach.

Additionally, even if the discovery rule does not apply to breach of contract, it does apply to conversion claims. The appellants argued against the inclusion of evidence regarding inter-company assignments of accounts, asserting that the first amended complaint named only RTS Thailand as plaintiff and did not include other Tasker entities. However, they did not challenge the sufficiency of evidence supporting the jury’s finding that RTS Thailand owned the claims. Their objection primarily focused on procedural issues of non-joinder and pleading, although Maryland procedural rules have changed the common law regarding actions by assignees of choses in action, which previously required the assignor’s name to be included.

The statute in question was active until June 1, 1957, when it was repealed by Chapter 399 of the Acts of 1957, following the Court of Appeals' adoption of new procedural rules effective January 1, 1957. This repeal addressed obsolete statutes related to civil procedure. Under current law, an assignment conveys title to the assignee, making them the real party in interest for claims associated with the assigned property, as referenced in Maryland Rule 2-201. In this case, RTS Thailand, as the assignee of accounts for consigned goods, holds the right to sue for their value.

Despite the appellants' argument regarding the sufficiency of RTS Thailand's pleadings, it was determined that they were not prejudiced by the admission of evidence related to inter-corporate assignments, even though such assignments were not explicitly detailed in the first amended complaint. The complaint indicated that RTS Thailand was pursuing claims for payments spanning three decades. The appellants acknowledged this in their pre-trial answer, which questioned RTS Thailand's legal capacity to sue on behalf of other entities.

Although Mr. Tasker's deposition regarding the assignments was not included in the appeal record, it was noted that he had been deposed without challenge from the appellants. Additionally, the appellants' objections prevented a proposed second amended complaint from being submitted. Consequently, the court affirmed the judgment of the Circuit Court for Anne Arundel County, with costs to be borne by the appellants.

An Alex Brown Cash Reserve Fund account was established on October 30, 1989, under the names of Mr. Tasker, his wife, and Mrs. Bacon, with Mrs. Bacon included due to the Taskers not being U.S. citizens. Mrs. Bacon was to make monthly deposits reflecting the net invoice price of sails sold by Tasker entities in the previous month. Mr. Tasker indicated that he and his wife occasionally withdrew funds for personal use. Checks written by Mrs. Bacon for Tasker entity consignments were documented, showing a progression from payments to RTS Hong Kong (1971-1973) to payments made to Rolly Tasker and Rolly Tasker Pty. Ltd. (post-1981).

Furthermore, a trading account existed where Bacon purchased sails for resale, distinct from the consignment account, which was the focus of the appeal. Initial and amended complaints named RTS Thailand as the sole plaintiff, but a second amended complaint included additional plaintiffs. However, the circuit court rejected this amendment upon request from the appellants, allowing RTS Thailand to proceed to trial alone. 

Under Rule 2-535(a), any party can motion for revisory power over a judgment within 30 days post-judgment. The jury's verdict included specified amounts, countering the appellants' claims. Mr. Tasker testified that the actual value of sails shipped to Mrs. Bacon was $315,000, contrary to the invoiced amount of $300,000. 

The jury’s response to liability regarding Mrs. Bacon was interpreted as relating solely to conversion, aligning with their finding that her corporation did not commit fraud. There was no assertion regarding limitations avoidance under CJ. 5-203, which addresses cases where a plaintiff's knowledge is obscured by an adverse party's fraud. The circuit court did not instruct on this statute, leaving no basis for discussion on the standard of proof. The discovery rule, as established by the Court of Appeals, acknowledges that the legislative intent was to allow access to courts for plaintiffs unaware of their injuries, rather than serving as an exception to the statute of limitations.