Appeal from the District Court of the Fourth Judicial District of the State of Idaho, in and for Ada County. The Hon. Dennis Goff, Senior District Judge.
The opinion of the court was delivered by: Eismann, Justice.
Stephen W. Kenyon, Clerk
2013 Opinion No. 20
The order of the district court is reversed.
This is an appeal out of Ada County from an order granting a judgment notwithstanding the verdict in a commercial lawsuit in which the jury found in favor of the defendant. We reverse the order and remand this case for consideration of the plaintiff's motion for a new trial.
Glenn Mosell is a commercial real estate broker in investment sales and a land developer. He owned about 290 acres of property in the Sunnyslope area of Canyon County, and he envisioned developing it and other land that he had an option to purchase into a destination resort. The development would include five-acre parcels of vineyards for second homes or resort-based residences; a state-of-the-art winery, tasting room, bulk wine & storage and custom crush wine facility; a luxury 4-star boutique hotel of 100 units; a world class destination and day spa; a gourmet restaurant; an event and business conference center; polo fields; an equestrian center; a sporting and athletic club; an amphitheater for music events and concerts; and a greenhouse and commercial fruit, produce and agricultural product market. The 290 acres included 153 acres of mature vineyards, and he had options for an additional 300 acres of vineyards. The name of the proposed development would be Polo Cove.
He contacted John Berryhill, a restaurateur in Boise, to see if he would be interested in building the restaurant in the development. Mr. Berryhill was the owner and president of Berryhill & Company, which operated a restaurant and catering business in a strip mall on Broadway Avenue in Boise. Mr. Berryhill agreed to participate in the proposed development, but not to build the restaurant.
Beginning in September 2005, Mr. Berryhill was paid a consulting fee by Mosell Equities, LLC, of which Mr. Mosell was the owner and managing member. The consulting fee was for designing a restaurant for the Polo Cove development. The last check to Mr. Berryhill was dated August 7, 2006, and he was paid a total of $25,000.
On April 12, 2007, Berryhill & Company signed a lease of space in downtown Boise in order to move the restaurant from the strip mall to that space. Messrs. Mosell and Berryhill both signed a personal guaranty of Berryhill & Company's obligations under the lease. Berryhill & Company then began making tenant improvements to the leased property.
On June 28, 2007, Mosell Equities paid Berryhill & Company the sum of $50,000 by check. The word "loan" was written on the memo line of the check. Mr. Berryhill made a photocopy of the check and then wrote on the photocopy below the check the following:
This is a loan from Mosell Equities to cover some misc. downtown expenses during our bookkeeper transition. It will go into the general check register be used for any billing of payables needed for downtown or Berryhill & Co.
It will be transitioned into part of Glenn's "buy in" of MoBerry Venture Corp. Inc.
Messrs. Berryhill and Mosell then both signed the document, which was admitted into evidence as Exhibit 1 in the trial and will hereafter be referred to as "Exhibit 1."
Over the next ten months, Mosell Equities issued nine additional checks to Berryhill & Company. Each of them had the word "loan" written on the memo line except for two. The check dated October 9, 2007, had "kitchen equipment" written on the memo line, and the last check dated April 30, 2008, had "suite 101 TI's"*fn1 written on the memo line. The checks totaled $405,000.
The restaurant opened in the downtown location in August 2007. The space initially rented for the restaurant totaled about 6,000 square feet. Berryhill & Company later rented additional space of about the same size in which it developed ballrooms and other facilities. Mosell Equities paid for the extra leased space for a time. Because of the economic downturn, Mr. Mosell decided not to proceed with the Polo Cove project and did not launch the intended sales effort in 2008. Later that year, Mosell Equities stopped paying the rent on the additional space, and Mr. Mosell and Mr. Berryhill ended their relationship.
On May 28, 2009, Mosell Equities filed this action against Berryhill & Company, Mr. Berryhill, and his wife. On September 11, 2009, it filed an amended complaint alleging six claims for relief, which were: (1) breach of an express contract; (2) breach of an implied contract; (3) unjust enrichment; (4) conversion; (5) fraud; and (6) piercing the corporate veil. The district court granted the Defendants' motion to dismiss the claim for piercing the corporate veil, which was the only claim made against Mr. Berryhill's wife. The Defendants then filed an answer, and Berryhill & Company filed a counterclaim for fraud.
The case was tried to a jury in September 2009. During the trial, Messrs. Mosell and Berryhill provided widely divergent testimony regarding their relationship and what had transpired.
Mosell Equities called Mr. Mosell as a witness, and he testified that he was interested in owning a half-interest in a restaurant and desired to invest in Berryhill & Company's restaurant because it was profitable and would give him cash flow. He also thought that he could enhance its value by bringing opportunity to it because he was a partner in Polo Cove and because of his real estate background. Initially, he and Mr. Berryhill intended to be co-owners of a holding company called MoBerry, Inc., (mentioned in Exhibit 1) that would own Berryhill & Company. Mr. Mosell would invest $387,000 in that entity and Mr. Berryhill would invest the stock of Berryhill & Company. Later, they decided that Mr. Mosell would simply purchase a one-half interest in Berryhill & Company for $400,000, even though a one-half interest in that company was not worth that much. He testified that the checks to Berryhill & Company were loans because Mr. Berryhill wanted to move his restaurant to downtown Boise, and it was also Mr. Berryhill's idea to expand the leased space in downtown Boise in order to have ballrooms and other facilities and so that he could move the catering business to that location. The loaned money totaling $405,000 was to be applied to purchase the one-half interest in Berryhill & Company, but Mr. Berryhill did not go through with the agreement. Mr. Mosell stated that Polo Cove was a non-entity, and that his reference to Mr. Berryhill as a partner in that project did not refer to a legal partnership, but only that Mr. Berryhill was acting in a collaborative or supportive effort for the development which has now been shelved.
Mosell Equities also called Mr. Berryhill as a witness to testify in its case in chief about the transaction between him and Mr. Mosell. Mr. Berryhill testified that when Mr. Mosell asked him if he would build a restaurant in the proposed Polo Cove development, Mr. Berryhill refused to do so and told him that 90% of new restaurants fail. Mr. Berryhill did not want to build a restaurant in the Polo Cove development on his own, and Mr. Mosell did not want to own a restaurant. They therefore decided to be partners in the development. Mr. Berryhill worked extensively on Polo Cove through July or August of 2008, working with the architects.
Although he was initially paid consulting fees, he agreed that they stop because Mr. Mosell said he was going to be making much more money from the development. They agreed to be partners in the Polo Cove development because Mr. Mosell needed his expertise, name, and knowledge in order to have the type of restaurant that Mr. Mosell wanted, and Mr. Berryhill needed Mr. Mosell in order to build a restaurant in the development. As they were working on Polo Cove, Mr. Mosell eventually suggested that Berryhill & Company's restaurant be moved from the strip mall on Broadway to the downtown area because he wanted to "build a sexy, downtown location restaurant, showcase for Polo Cove, to bring investors to, so he didn't have to take them to a strip mall, so he could sell them on the aspect of Polo Cove." Mr. Berryhill agreed to the move because he viewed it as part of the Polo Cove development. It was necessary to make tenant improvements before moving into the leased space. The first check was to pay some of the bills that were due for improvements and to pay Berryhill & Company's payroll. Its bookkeeper had recently died, and the new bookkeeper had lost the electronic financial records when she transferred them to her home computer. When Mr. Berryhill saw the check, he asked why the word "loan" was written on the check, because they had never discussed the money as a loan. Mr. Mosell stated that for tax purposes they had to call it a loan until they could work out the terms of their formal relationship. After the restaurant was moved to the downtown location, Mr. Mosell wanted to expand the leased space in order to improve marketing of the Polo Cove development. Mr. Berryhill would not have agreed to either the move downtown or the expansion had it not been to promote the Polo Cove development.
In the Defendants' case in chief, Mr. Berryhill testified that he had no desire to expand the leased downtown space on his own because the restaurant could not support the extra rental payments. Mr. Mosell said he would fund the ballrooms and Polo Cove would pay for the showroom. A few months after the expansion was completed, Mosell Equities stopped making the rent payments for the expanded space and Mr. Mosell terminated his relationship with Mr. Berryhill. The Polo Cove development was the only reason that the restaurant was moved to the downtown location and the only reason for the expansion. Now, Berryhill & Company has about the same income it did at its location on Broadway, but it is paying $15,000 to $20,000 more in rent each month, and, as of April 17, 2010, it was $149,255 in arrears in rental payments and late fees for the expansion. He also testified that the cost of the tenant improvements for the restaurant was $100,048.43, and the cost of the tenant improvements for the expansion was $193,801.29, all of which were paid by Berryhill & Company. In addition, there are monthly impact fees that Berryhill & Company pays to the city.
The jury returned a finding that Mosell Equities failed to prove its claims against Berryhill & Company for breach of an express contract, breach of an implied contract, and unjust enrichment; that Mosell Equities proved its claim against Berryhill & Company for conversion of property valued at $2,016.85; that Mosell Equities failed to prove its claim of fraud against Mr. Berryhill and Berryhill & Company; and that Berryhill & Company failed to prove its claim of fraud against Mosell Equities.
Mosell Equities filed a motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial. The motion is not in the record on appeal, but in its supporting memorandum Mosell Equities asked the district court to set aside the jury verdict and to grant it a judgment notwithstanding the verdict on each count.*fn2 The supporting memorandum indicated that the alternative motion for a new trial was on the ground of insufficiency of the evidence to justify the verdict. After oral argument, the district court orally granted the motion for a judgment notwithstanding the verdict as to the claim of breach of an express contract and denied the motion as to the other claims. It also denied the motion for a new trial. On October 26, 2010, the court entered its Order Granting Plaintiff's Motion for Judgment Notwithstanding the Verdict on Count 1 of Its Complaint. That order stated as follows:
During the hearing, the Court heard oral argument from each counsel, and thereafter stated the Court's decision and bases for that decision on the record. The Court now incorporates its comments, rationale, and ultimate decision ...