2022 Ark. App. 14
Ark. Ct. App.2022Background
- Sargent (plaintiff) sued Nick Allen (and others) for breach of contract, labor/materials, and conversion over a failed produce venture; Sargent claimed a one-third share of profits after securing a $2 million Walmart contract.
- Only Nick Allen was effectively served; Allen defaulted (liability established) after Sargent moved to strike his late answer; the court reserved damages for a later hearing.
- At the damages hearing the trial court awarded $72,773.33 in lost-profits damages and $19,000 and $32,000 for conversion of a green-bean harvester and a three-row planter, respectively.
- Evidence at trial showed All-Ag, LLC took distributions of about $217,000 in 2016 but the LLC’s profit-and-loss and tax records (discussed but not admitted) reflected an overall loss and a loss on the Walmart contract specifically.
- Sargent testified he customized/fabricated the harvester and planter and asserted their values; no direct fair-market-value evidence or a ‘‘reasonably complete set of figures’’ for lost profits was introduced.
- The Court of Appeals held the lost-profits award and the conversion awards were unsupported by competent evidence and reversed; a concurring/dissent would have affirmed the conversion awards under an exceptions-based valuation approach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of damages after default judgment | Sargent argued his testimony, contract sales figures, and LLC distributions showed damages | Allen argued plaintiff failed to prove damages with reasonable certainty; distributions are not contract profits | Default establishes liability but not damages; plaintiff must prove damages with reasonable certainty; damages awards reversed where proof lacking |
| Lost-profits measure and proof | Sargent asserted Walmart sales (~$200K) and LLC distributions supported a one-third profit share | Allen showed the LLC lost money on the Walmart contract and that year overall; distributions reflect other ventures and are not contract profits | Reversed: distributions were an improper basis and evidence did not remove profits from speculation; lost-profits award not supported |
| Conversion damages valuation standard | Sargent urged his testimony about fabrication costs/values and uniqueness justified a non–market-value measure | Allen argued fair-market-value is the proper measure and plaintiff failed to prove FMV at time/place of conversion | Majority reversed conversion awards for insufficient FMV evidence and improper departure from market-value standard; concurrence/dissent would have applied equitable exception and affirmed |
Key Cases Cited
- Entertainer, Inc. v. Duffy, 407 S.W.3d 514 (default judgment establishes liability but damages require proof)
- Volunteer Transp., Inc. v. House, 162 S.W.3d 456 (a defaulted defendant may challenge sufficiency of damages on appeal)
- Robertson v. Ceola, 501 S.W.2d 764 (lost profits must be proved with reasonable certainty; avoid speculation)
- JAG Consulting v. Eubanks, 72 S.W.3d 549 (measure of conversion damages is fair-market value at time/place)
- Commercial Fitness Concepts, L.L.C. v. WGL, LLC, 516 S.W.3d 764 (equipment claimed as application-specific still valued by FMV when usable elsewhere)
- First Nat’l Bank of Brinkley v. Frey, 668 S.W.2d 533 (market value not the only measure; circumstances/expenses may justify different measures)
- Ford Motor Credit Co. v. Herring, 589 S.W.2d 584 (general rule: FMV is the measure for conversion damages)