Opinion
No. 110879.
02-13-2015
WASTE CONNECTIONS OF KANSAS, INC., Appellee/Cross-appellant, v. RITCHIE CORPORATION, Appellant/Cross-appellee.
Lucas C. Wohlford and Trevor C. Wohlford, of Morris, Laing, Evans, Brock & Kennedy, Chtd., of Topeka, and Ken M. Peterson and Will B. Wohlford, of same firm, of Wichita, for appellant/cross-appellee. Steven D. Gough, Nathan R. Elliott, and Joseph A. Schremmer, of Withers, Gough, Pike, Pfaff & Peterson, LLC. of Wichita, for appellee/cross-appellant.
Lucas C. Wohlford and Trevor C. Wohlford, of Morris, Laing, Evans, Brock & Kennedy, Chtd., of Topeka, and Ken M. Peterson and Will B. Wohlford, of same firm, of Wichita, for appellant/cross-appellee.
Steven D. Gough, Nathan R. Elliott, and Joseph A. Schremmer, of Withers, Gough, Pike, Pfaff & Peterson, LLC. of Wichita, for appellee/cross-appellant.
Before HILL, P.J., McANANY, J., and BURGESS, S.J.
MEMORANDUM OPINION
PER CURIAM.
Because the correct price a holder of a right of First refusal had to pay for a waste transfer station was a material fact that could not be resolved by a summary judgment motion, the Kansas Supreme Court remanded this case for trial. It now returns to the appellate court after a jury determined that Ritchie Corporation breached its duty of good faith and fair dealing. Ritchie argues for a reversal and remand because, in its view, there was insufficient evidence to prove a breach and the trial court's comments made in front of the jury prejudiced its case. We affirm.
A brief/actual summary is helpful here to provide a context.
Waste Connections of Kansas, Inc. operates a nonhazardous solid waste transfer station in Sedgwick County. Based on a provision of an Escrow Agreement assigned to Waste Connections by the previous operator of the station, it held a right of first refusal to purchase the station. Ritchie Corporation, the owner of the land, sought to sell the station along with an adjacent landfill site it owned to Cornejo and Sons, Inc. Many more details concerning the agreements and the words and deeds of the parties about this transaction can be found in the Supreme Court opinion, Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 298 P .3d 250 (2013).
When Waste Connections received notice of the purchase agreement between Cornejo and Ritchie, Waste Connections, through its attorney, advised Ritchie's attorney that it elected to exercise its right of first refusal under the Escrow Agreement to purchase Ritchie's interest in the transfer station. But the attorney stressed that Waste Connections objected to paying $2 million to exercise its right of first refusal and wanted to pay $ 1.45 million instead.
In order to protect its interests, Waste Connections filed a petition for declaratory judgment in district court and delivered to the escrow agent a certified check payable to Ritchie in the amount of $2 million, “subject to its express reservation of its rights to determine the proper price payable for its exercise of the Right of First Refusal is $1,450,000.00, rather than $2,000,000.00 as claimed by Ritchie.”
In its lawsuit, Waste Connections attacked on three fronts. It alleged Ritchie had improperly inflated the price of the transfer station by $550,000; it sought a determination of the proper price it had to pay in order to exercise its right of first refusal; and, it sought damages for an alleged breach of the duty of good faith and fair dealing. Ritchie answered by denying the allegations and filed a counterclaim seeking declaratory judgment in its favor that would hold the Asset Purchase Agreement between Ritchie and Cornejo constituted a valid offer from a third party to purchase its rights under the Escrow Agreement for $2 million and that Waste Connections had exercised its right of first refusal by agreeing to buy the transfer station for $2 million. Both parties filed motions for summary judgment.
At this point in the case history, the district judge denied Waste Connections' motion for summary judgment, entered judgment in favor of Ritchie, and awarded it almost $109,000 in attorney fees. The judge found there was no evidence of bad faith or collusion by Ritchie in arriving at a $2 million value for the transfer station and that Cornejo's acceptance of the Asset Purchase Agreement established a $2 million contract for the transfer station. This contract, in turn, triggered Waste Connections' right of first refusal and entitled it “to step into the shoes of Cornejo and purchase the Transfer Station from Ritchie for $2 million.” Waste Connections appealed the decision.
A panel of this court reversed the summary judgment granted to Ritchie and, instead, granted judgment to Waste Connections, and then it remanded the case to the district court for reconsideration of attorney fees. Waste Connections of Kansas, Inc. v. Ritchie Corp., 43 Kan.App.2d 655, 670, 228 P.3d 429 (2010).
The Supreme Court reversed the decisions of both courts. It held that neither party was entitled to summary judgment because there were genuine issues of material fact about what was the correct price to exercise the right of first refusal. Waste Connections of Kansas, Inc., 296 Kan. at 973. En remanding the case, the Supreme Court gave specific guidance to the trial court and the parties about this jury trial. We will incorporate into our analysis the explicit guidance the court gave.
After remand, the jury returned a verdict favorable to Waste Connections.
Both parties presented their cases to the jury. At one point in the trial, during Ritchie's cross-examination of a witness from Cornejo, the judge commented in the presence of the jury that the witness never made a $2 million offer for the transfer station. After an objection, the judge told the jury, “And just my comments aren't evidence either. If you all's memory is different from ours, it's your memory that counts.” Later, outside the presence of the jury, the court denied Ritchie's motion for a mistrial on this point.
At the end of the evidence, the court asked the jury to answer a series of questions. First, the court asked the jury to determine whether Ritchie breached the Escrow Agreement and failed to comply with the express terms of the right of first refusal by accepting an offer from a third party purchaser without disclosing the offer to Waste Connections. If the jury concluded Ritchie did violate the express terms of the Escrow Agreement, it would then determine the damages suffered by Waste Connections and its duty was finished.
Alternatively, if the jury concluded Ritchie had complied with the express terms of the right of first refusal, the court instructed the jury to determine whether Ritchie breached its implied duty of good faith and fair dealing under the Escrow Agreement. If the jury answered “no” to this question, its duly ended. However, if the jury found Ritchie had breached its implied duty of good faith and fair dealing, it was instructed to next determine whether Waste Connections was required to pay Ritchie either $1.45 million or $2 million to exercise its right of first refusal on the transfer station.
If the jury found Waste Connections was required to pay $2 million, its duty ended. However, if the jury found Waste Connections was required to pay $1.45 million, it then had to determine the amount of damages, if any, Waste Connections suffered.
Ultimately, the jury did not find that Ritchie had breached the express terms of the Escrow Agreement by not disclosing to Waste Connections an offer from a third party purchaser that Ritchie had accepted. But, the jury did find that Ritchie had breached the implied duty of good faith and fair dealing under the Escrow Agreement. The jury decided that Waste Connections was required to pay Ritchie $1.45 million to exercise its right of first refusal. The jury then awarded $550,000 in damages to Waste Connections.
The court granted judgment to Waste Connections for $550,000 in damages, along with prejudgment interest and attorney fees, for a total of $1,659,113.27.
In this appeal. Ritchie contends there was insufficient evidence that it breached its implied duty of good faith and fair dealing by padding the price of the transfer station. Ritchie also seeks a new trial because of a statement made by the trial judge in front of the jury, which was, in Ritchie's view, prejudicial to its case. We will take up those issues in that order. Additionally, because we are affirming, we will not address Waste Connections' cross-appeal of an alleged error in a jury instruction on its theory of an express breach of contract.
The Supreme Court's opinion controls many aspects of this case.
We are mindful of the fact that this case was remanded to the district court by our Supreme Court for factual determinations. Therefore, in our view, the law of this case has been pronounced in that court's opinion and we, as well as the parties, are duty bound to follow it. We point to three obvious points made by the court concerning issues about the right of first refusal, the correct price and sufficiency of notice, and the implied duty of good faith and fair dealing.
The Supreme Court spelled out what the right of first refusal meant in this case. Waste Connections of Kansas, Inc., 296 Kan. at 968–70. Specifically, the right of first refusal bound Ritchie to convey any offer it was willing to accept from Cornejo to Waste Connections. And, Waste Connections could not force Ritchie to sell if Ritchie was unwilling to sell under the terms of Cornejo's offer. Moreover, as the seller, Ritchie gave up its chance to negotiate with Waste Connections for a price higher than what Cornejo was willing to offer. Conversely, Waste Connections gave up its chance to negotiate with Ritchie for a price lower than one Ritchie was willing to accept from Cornejo. In other words, neither Ritchie nor Waste Connections had unfettered business judgment to use the sale of the transfer station to maximize profit. 296 Kan. at 969.
Then, the court turned to the question of price. When the court looked at the Asset Purchase Agreement between Ritchie and Cornejo, it concluded the agreement was ambiguous. The contract simply was not clear whether Waste Connections could exercise its right of first refusal for the transfer station for $1.45 million or $2 million. 296 Kan. at 966.
At this point, the court pointed to conflicting evidence the factfinder would have to consider in settling which price Waste Connections must match. Specifically, the court noted that Waste Connections had presented evidence tending to support “Cornejo was not interested in acquiring the transfer station at all, that it was willing to do so only because Ritchie insisted that the transfer station be packaged with the landfill,” and that “Cornejo did not care how Ritchie allocated the package purchase price as long as Cornejo did not pay more than $3.5 million for the landfill.” 296 Kan. at 972. In turn, the court noted that Ritchie had presented evidence that tended to support “the existence of a business justification for [Ritchie's] demand for $2 million for the transfer station, as well as an explanation for why the landfill was worth more to Cornejo as a stand-alone acquisition than as part of a package deal.” 296 Kan. at 972.
With these conflicting possible prices exposed, the court provided specific guidance for the factfinder on remand. The court clarified that the factfinder must determine two points:
“[W]hen there was a price for the transfer station that Cornejo was willing to pay and Ritchie was willing to accept; whether that price was $2 million or $1.45 million; and whether [the] June 27, 2007, letter enclosing the Asset Purchase Agreement was a sufficient and timely communication of the correct offer to Waste Connections.” 296 Kan. at 973.
Following up, the court also acknowledged that the factfinder might be faced with the question of good faith and fair dealing on remand. 296 Kan. at 973–77. After emphasizing that these factual questions of whether Ritchie acted in bad faith meant that the determination of the correct match price was inappropriate for either summary judgment or a declaratory judgment on remand, the Supreme Court gave these directions:
“Should the factfinder reach the duty of good faith and fair dealing on remand, we emphasize that the inherently factual question of whether Ritchie breached the Escrow Agreement by violating the duty is not dependent upon the mere existence of the package deal alternative in the Asset Purchase Agreement or even upon Ritchie's involvement in setting the portion of the package price attributable to the transfer station.” 296 Kan. at 975.
In other words, the Kansas Supreme Court rejected any argument that there is no presumption that Ritchie acted in good faith so long as it did not engage in arbitrary behavior or collude with Cornejo. And the fact that there was a difference of $550,000 in the two possible purchase prices in a package deal does not create a rebuttable presumption that Ritchie acted in bad faith. 296 Kan. at 975.
Finally, in summarizing the evidence before it and Waste Connections' allegations of bad faith, the court stated:
“In this case, of course, there is evidence that Ritchie not only influenced the allocation in the Asset Purchase Agreement but may have arrived at it without any meaningful input from Cornejo. And there can be little question that, if the factfinder determines that Ritchie was attempting to thwart Waste Connections' right of first refusal by padding the price of the transfer station, no matter how it achieved that end, there was a breach of the duty of good faith inherent in the Escrow Agreement.” 296 Kan. at 976.
Thus, the court made it clear that for Waste Connections to prevail on its theory that Ritchie breached its implied duty of good faith and fair dealing, it was required to prove either (1) Ritchie intentionally or purposefully did something to prevent Waste Connections from exercising its part of the right of first refusal under the Escrow Agreement or (2) Ritchie did something that had the effect of destroying or injuring Waste Connections' right to receive the expected benefits of the right of first refusal. 296 Kan. at 974.
Because the jury found that Ritchie did not breach the express terms of the Escrow Agreement by failing to convey to Waste Connections an offer for the transfer station, we will not concern ourselves with any comments by the court discussing examples of possible outcomes if the factfinder had determined Ritchie had not communicated an offer from Cornejo properly. See 296 Kan. at 973–74.
We address the implied duty question.
Kansas courts recognize the duty of good faith and fair dealing in all contracts, except employment-at-will contracts. Estate of Draper v. Bank of America, 288 Kan. 510, 525, 205 P.3d 698 (2009). Whether Ritchie violated the duty of good faith and fair dealing raises a question of fact. Waste Connections of Kansas, Inc., 296 Kan. at 965.
The Kansas Supreme Court describes the requirements of good faith and fair dealing as follows:
“The duty of good faith and fair dealing is an implied undertaking in every contract on the part of each party that he or she will not intentionally and purposely do anything to prevent the other party from carrying out his or her part of the agreement or do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. Ordinarily, if one exacts a promise from another to perform an act, the law implies a counterpromise against arbitrary or unreasonable conduct on the part of the promisee. However, essential terms of a contract on which the minds of the parties have not met cannot be supplied by the implication of good faith and fair dealing.” 296 Kan. 943, Syl. ¶ 6.
The court then aptly summarized the various components of the right of first refusal as follows:
“In a right of first refusal situation, each party gives up something in exchange for increased certainly of opportunity to make a deal. The seller gives up its chance to negotiate with the holder of the right of first refusal for a price higher than the one a third party is willing to offer. The holder of the right of first refusal gives up its chance to negotiate with the seller for a price lower than one the seller is willing to accept from a third party. [Citations omitted.] The key to activation of a holder's right of first refusal is mutual willingness to enter into a sale at a specific price satisfactory to both the third party and the seller. The seller may not force a purchase by the holder of the right of first refusal at a higher price. The holder of the right of first refusal may not force a sale to it at a lower price. Room to dicker is effectively circumscribed on both sides of the table by the necessity for price acceptability to the third party. [Citations omitted.] The nature of a right of first refusal agreement means that neither the seller nor the right holder remains free to exercise unfettered business judgment to use the sale of the subject property or other asset to maximize profit or shareholder value. Each has voluntarily constrained such judgment and taken on obligations to the other. [Citation omitted.]” 296 Kan. at 968–69.
In this appeal, Ritchie continues to argue that Waste Connections should not have prevailed on its bad-faith claim because the good-faith doctrine did not prohibit Ritchie from negotiating with Cornejo for the purpose of maximizing Ritchie's profit. Further, Ritchie argues there was insufficient evidence to support the jury's verdict that it did breach the implied duty.
We find sufficient evidence supports the jury's verdict that Ritchie breached its implied duty of good faith and fair dealing by padding the price of the transfer station by $550,000. We highlight the relevant evidence from Cornejo's witnesses and Tom Ritchie that leads us to believe a jury could reach such a verdict.
At trial, the jury heard Charles Hill, Cornejo's director of regulatory affairs, testify to the following:
• Hill prepared a summary of the Escrow Agreement for David Royse, Cornejo's chief financial officer, and Ronald Cornejo prior to the second negotiation meeting.
• Waste Connections could terminate the Escrow Agreement for any reason upon 90 days' notice for a fee of $40,000 and that the early termination would result in the end of the stream of royalty payments for the balance of the 35–year term and a 3–year covenant not to operate a transfer station.
• Royse or Ronald Cornejo told Tom Ritchie at the negotiation meetings that the most Cornejo would pay for the package deal was $4 .95 million, it did not matter how the $4.95 million was allocated so long as it could purchase the landfill for $3.5 million, and Tom Ritchie requested the $2 million allocation for the transfer station.
• Cornejo's position throughout the negotiations for the package deal was that there was an implicit allocation of $1.45 million in its $4.95 million offer for the package deal.
The jury then considered Royse's testimony that Cornejo's position regarding the offer of $4.95 million for the package deal was accurately reflected in the following statements he made in his deposition testimony:
• “ ‘We agreed to pay the [$1.45 million] on top of the [$3.5 million] for that purchase, but that's taking the thing as a group.’ “
• “ ‘What we said is we want the landfill, period. We'll pay [$3.5 million] for it. If you want to sell us both, we'll pay [$4.95 million].’ “
Royse also testified:
• Cornejo was willing to pay $3.5 million for the landfill irrespective of whether Waste Connections exercised its right of first refusal so long as the permit increased the disposal area of the landfill to 49.74 acres;
• The $2 million for the transfer station in the Asset Purchase Agreement was an allocation of the $4.95 million package offer and that Cornejo would never have paid $1.45 million or $2 million as stand-alone price for the transfer station; and
• Cornejo did not want to purchase Ritchie's interest in the transfer station because it was not in that type of business and Waste Connections could invoke its termination clause and leave Cornejo with a large building.
And when Royse was asked, “Is it also correct at this meeting that Cornejo told Ritchie that Cornejo did not care how Ritchie allocated the [$]4.95 million as long as Cornejo could buy the landfill for [$]3.5 million?” He answered, “I believe that's the statement that I made.”
Then the jury heard Ronald Cornejo testify, “Tom [Ritchie] wanted $2 million for the transfer station, and I was not willing to give that much for that property.” Ronald Cornejo was asked about his deposition testimony responding to a question about Cornejo's position regarding the early-termination risks associated with a $2 million offer for the transfer station. He had previously testified, “ ‘It didn't have that much value to Cornejo. We felt that Waste Connections ... held all the cards to the property. And ... we could very well be left at risk.” Ronald Cornejo confirmed that this previous testimony was correct at both the time of his deposition and now. He was then asked about his previous deposition testimony indicating that Cornejo did not believe the transfer station was worth $2 million to his company. Ronald Cornejo answered, “I don't believe it had that value to Cornejo, that's why we had the reduced value [of $4.95 million] as a combined unit.”
Ronald Cornejo also testified:
• If Ritchie obtained the amended permit expanding the disposal area, Cornejo was willing to offer $3.5 million for the landfill as either a stand-alone offer, allowing Ritchie to keep its interest in the Escrow Agreement, or as a package deal, provided it did not spend more than $4.95 million;
• Cornejo had no objection to Ritchie allowing Waste Connections to exercise its right of first refusal for $1.45 million;
• The allocation of $2 million for the transfer station was made at Tom Ritchie's suggestion; and
• Cornejo did not care how Ritchie proportioned out the total purchase price of the package deal as long as the total price was what it offered ($4.95 million).
Finally, the jury could place the aforementioned testimony from Hill, Royse, and Ronald Cornejo within the context of Tom Ritchie's deposition testimony. In his deposition, Tom Ritchie was asked, “ ‘Your company would have been willing to accept [$]1.45 million for the transfer station interest and [$3.5 million] for the landfill as a package deal with Cornejo; isn't that right?” Tom Ritchie answered, “That is correct. But what we had actually agreed is fully contained in its entirety within the Asset Purchase Agreement.” Tom Ritchie also acknowledged:
• Ronald Cornejo told Tom Ritchie that Cornejo did not care how the $4.95 million package deal was allocated so long as it could purchase the landfill for $3.5 million;
• It was Tom Ritchie's idea to allocate the $2 million for the transfer station;
• Tom Ritchie was aware that if he allocated $2 million for the transfer station and Waste Connections exercised its right of first refusal that Ritchie would receive $550,000 more than the $4.95 million Cornejo was offering for the package deal; and
• Tom Ritchie's motivation throughout the negotiations was for Ritchie to maximize the value it could get for both assets for the benefit of its shareholders.
Thus, we see that the record provides sufficient evidence that the $2 million allocation to the transfer station and corresponding $550,000 discount to the $3.5 million offer for the landfill was influenced by Ritchie, not by Cornejo's business judgment, to maximize Ritchie's profit by $550,000.
And that is where Ritchie's appeal fails. The nature of the right of first refusal in the Escrow Agreement did not give Ritchie unfettered business judgment to use the sale of the transfer station to maximize profit or shareholder value. As the Supreme Court noted: “[I]f the factfinder determines that Ritchie was attempting to thwart Waste Connections' right of first refusal by padding the price of the transfer station, no matter how it achieved that end, there was a breach of the duty of good faith inherent in the Escrow Agreement.” Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 976, 298 P.3d 250 (2013).
Ritchie's conduct destroyed or injured Waste Connections' right to receive the expected benefits of the right of first refusal. Ritchie has not convinced us that there was insufficient evidence to support the jury's verdict.
The judge's words were not helpful, but in the end, they were harmless.
Ritchie raises two arguments to support its claim that this court should grant a new trial. First, Ritchie alleges the trial judge prejudiced its substantial right to a fair trial by expressing his “biased opinion” on the ultimate fact issue in the presence of the jury. Second, Ritchie argues that the admonitions to the jury did not cure the purported prejudice caused by the trial judge's alleged improper comments.
When examining allegations of judicial misconduct, we must review the circumstances of each ease to determine whether judicial comments rise to the level of judicial misconduct. If a proper and reasonable interpretation will render the judge's remark unobjectionable, the remark cannot be found to be prejudicial. State v. Kemble, 291 Kan. 109, 113, 238 P.3d 251 (2010). The mere possibility of prejudice from a judge's remark is not sufficient to overturn a verdict or judgment. Ettus v. Orkin Exterminating Co., 233 Kan. 555, 565, 665 P.2d 730 (1983). Ritchie, as the party alleging judicial misconduct, bears the burden of establishing that misconduct occurred and that the misconduct prejudiced its substantial rights. See Kemble, 291 Kan. at 113.
We examine the comments in question.
Here, the alleged prejudicial comments occurred after counsel for Waste Connections, Steven Gough, objected during the cross-examination of Ronald Cornejo by counsel for Ritchie, Ken Peterson.
Peterson began his cross-examination of Ronald Cornejo by discussing the draft letter of the proposed purchase agreement Cornejo sent to Ritchie on March 15, 2007. Ronald Cornejo agreed the letter contained a $4,950,000 offer for the package deal of which $2,000,000 was payable to Ritchie for its rights under the Escrow Agreement, or the waste transfer station, and that if Waste Connections exercised its right of first refusal under the Escrow Agreement then the stand-alone purchase price would be $3,500,000. Peterson continued to question Cornejo on the nature of its offer, and the following exchange occurred:
“[Q Peterson]. And is the only offer that you folks made for the transfer station $2 million?
“A [Ronald Cornejo J. The only offer we made—never made an offer specifically for the transfer station.
“Q. Right but 1 mean
“A. Only as a package.
“Q.Yeah, I misstated it. In the package transaction, the only offer for the transfer station was [$]2 million?
“A. Yes.
“Q. There was no other number, was there?
“A. Not that I'm aware of.
“Q. Did you ever offer, so we can get this absolutely clear, $1 .45 million for the transfer station, whether it was stand alone or in a package? Never did, did you?
“A. I don't recall. I don't remember that number.
“Q. All right. I've never seen any document reflecting that. Do you know of any?
“A. Not that I'm aware of.”
Peterson then began questioning Ronald Cornejo regarding Royse's testimony, and Gough objected:
“Q [Peterson]. All right. When Mr. Royse testified that he felt the $2 million transfer station price was reasonable, as you sit here today, do you agree with his testimony?
“A [Ronald Cornejo]. Repeat that, please.
“Q. Yes. You heard Mr. Royse say that he felt the $2 million price for the transfer station, that's in the Asset Purchase Agreement, was a reasonable price. Do you agree with him?
“MR. GOUGH: I object. I think that's not what Mr. Royse said. That—that he was talking about the allocation within the package, not an outright price for the transfer station.”
The following exchange between Peterson and the trial judge, in the presence of the jury, then occurred bringing in the alleged prejudicial comments at issue:
“THE COURT: Actually that question has been asked a couple of times and the witness—and all the witnesses have indicated there's never been an offer for the [$]2 million.
“MR. PETERSON: Never been an offer? No.
“THE COURT: It's in the contract, but there's no offer. This witness has—I could read it back—has never made an offer for $2 million for that.
“MR. PETERSON: Ail right.
“THE COURT: And so that testimony is in—is on the record. So to asked and answered, yes.
“MR. PETERSON: Well, I disagree, but we'll handle that.
“THE COURT: Well, the record is what it is.
“MR. PETERSON: The record is what it is.
“THE COURT: And just my comments aren't evidence either. If you all's memory is different from ours, it's your memory that counts.” (Emphasis added.)
After the trial judge admonished the jury, the cross-examination continued with Ronald Cornejo agreeing that the Asset Purchase Agreement reflected the total purchase price of $4.95 million and a $2 million allocation to be paid for the rights under the Escrow Agreement. The trial judge then recessed the trial and excused the jury to clarify that his aforementioned comments were made in response to Peterson's repeated incorrect references to the testimony. The trial judge clarified:
“THE COURT: Here's my problem, Mr. Peterson.... Everyone has consistently said, but you—sometimes you say that there's an offer for the—for the transfer for [$]2 million, then sometimes you say there's an allocation, depending on who you're asking, the type of question. All the witnesses on direct, which you have indicated has been asked and answered several times, indicated we never made a $2 million offer. But yet you now. in your questioning, keep talking about the $2 million offer. There was no—there's been no testimony. This witness has repeatedly said we never offered to buy that for $2 million. They said we are going to allocate $2 million in this contract. That contract doesn't make a $2 million offer either. Legally it does not make a $2 million offer. It says we will pay this much for both of them.
....
“THE COURT: If—if there is a sale of [$]3.5 million for one item, then the other item is allocated at $2 million. That's not an offer to buy.
....
“THE COURT:—so you're making some legal arguments on facts that aren't in—on the record. And so there's my problem.
....
“THE COURT: And it's your defense, 1 don't want to deny it. But at the same time, you got to pick which way you're going to stick to.”
The trial judge then agreed with Peterson's objection that the judge's comments should not have been made in front of the jury. Peterson then argued, “The jury could certainly get from the testimony on cross, on the chart the only price for the transfer station was [$]2 million. That's the only price. They could infer that's an offer.... I would ask you to tell the jury to totally disregard [those statements.]” (Emphasis added.) The trial judge once again clarified, “[T]here was no testimony that there was an offer for $2 million on the transfer station.... [I]t's an allocation,” and he then reiterated that he intended to properly admonish the jury again once it returned.
Both parties agreed an admonishment was in order, and the trial judge conceded again that his comments “should have been outside the hearing of the jury, period.” The trial judge proposed the parties agree on a written admonishment “to undo what I've done” and acknowledged, “I don't think it's impossible, but it certainly is difficult.”
Ritchie moved for a mistrial on the grounds that the trial judge had made comments on an issue of fact for the jury. The trial judge denied this motion, explaining, “[T]here is no factual issue if there was or was not an offer. The Supreme Court has already said there's an offer, period.” The trial judge clarified the jury was not going to be asked if there was an offer and the amount of the offer, only if there was a breach of contract. After this, Gough suggested what a proper admonishment would include. Peterson said that he would defer to the court because any suggestion of a proper admonition would waive Ritchie's right to a mistrial. The trial court advised Ritchie that if it suggested an admonition, “[A]bsolutely no way do you waive your right” to request a mistrial.
When the jury returned to the courtroom, the trial court gave the following admonition:
“THE COURT: ... I just need to do a quick admonition. I want to apologize to both you and the attorneys. My job, as I've already instructed you, is to take care of whatever legal issues pop up and rule on those. And that's what I've been doing. Nothing that I have said and done on those technical legal rulings on how questions are asked, that type of thing, in any way is to imply or tell you or indicate that there's a factual finding that I've made, because there's not. There's legal definitions and legal interpretations that I have made. But ultimately in this case, you will decide what is or is not. And you'll be given very specific questions at the end of this case that you're going to answer factually what happened. And again, I don't make those decisions, you do. And so again, 1 just repeat for about the fourth or fifth time, because it is truly that important, that nothing in my rulings or comments from the bench are to indicate or to tell you how you ultimately are supposed to find in this case factually or any other way. Again, you will be given specific questions to answer, and you will be doing that based on your memory, your decisions. With that in mind, counsel, are you ready to proceed?”
At the outset, we note that from our reading of the record, we conclude the trial judge's comments that Cornejo never made a $2 million offer for the transfer station were factually correct. As discussed above, all of Cornejo's witnesses indicated the $2 million amount for the transfer station in the Asset Purchase Agreement was an allocation of the $4.95 million package offer dictated by Ritchie, not a stand-alone offer for the transfer station.
Ritchie does not convince us that the question whether Cornejo made an offer of either $1.45 or $2 million for the transfer station was the “ultimate fact issue” determinative of whether Ritchie breached its implied duty of good faith and fair dealing. Ritchie would have us believe that had the jury concluded Cornejo offered $2 million for the transfer station, the jury could not have found that it acted in bad faith. Pointing to Instruction No. 8. Ritchie erroneously argues that if the jury found “Cornejo actually offered $2 million for the Transfer Station ... Ritchie's proposal to allocate $2 million to that property could not have ‘padded’ the price ‘above what Cornejo was willing to pay.’ “
Ritchie's argument ignores the plain holding of the Supreme Court on this point. The Supreme Court advised that even if the factfinder found Cornejo had offered $2 million for the transfer station, it would still need to determine whether Ritchie breached the duty of good faith and fair dealing. Waste Connections of Kansas, Inc., 296 Kan. at 973. Thus, whether Cornejo actually made an offer of $1.45 or $2 million does not answer the ultimate issue of fact, i.e., whether the evidence supported that Ritchie influenced the $2 million allocation by granting a discount of $550,000 to Cornejo's stand-alone offer for the landfill. See 296 Kan. at 976.
Next, Ritchie argues it is disingenuous for Waste Connections to argue that the trial judge's comments did not go to the ultimate fact issue when its counsel “unequivocally argued at trial that the question of whether Cornejo offered $2 million or $1.45 million is ‘exactly what the Supreme Court has said needs to be decided. ’ “ (Emphasis added.) But Ritchie fails to admit that the attorney made this statement while arguing to the trial court the proper question before the jury under its first theory of breach—whether Ritchie had breached the express terms of the Escrow Agreement—not its implied duty claim.
The trial judge's comment was not helpful, but if it was error, we consider it harmless in light of the jury's verdict. The jury answered “NO” to question No. 1 in the verdict form, which read: “Did the defendant breach the Escrow Agreement by failing to comply with the terms of the right of first refusal by failing to disclose to plaintiff an offer from a third party purchaser, which was accepted by the defendant?” Instruction No. 8 explained to the jury Waste Connections' claim that Ritchie had breached the express provisions of the right of first refusal in the Escrow Agreement by failing to communicate to Waste Connections that it was willing to accept Cornejo's offer to pay $1.45 million for the transfer station and $3.5 million for the landfill. It appears that Ritchie's position prevailed with the jury, thus rendering the judge's remarks harmless.
This jury concluded the transfer station price of $2 million was an allocation by Ritchie, not an offer from Cornejo. The jury then turned its inquiry to the question of any breach of the implied duty of Ritchie in this situation.
We reject Waste Connections' argument that Ritchie “gave up its right to complain about the sufficiency of the admonition given” because it “declined the Trial Court's offer to propose a jury admonition.” Ritchie timely objected, requested an admonition, and moved for a mistrial. In Masson v. Kansas City Power & Light Co., 7 Kan.App.2d 344, 351–52, 649 P.2d 113, rev. denied 231 Kan. 801(1982), this court, in finding that misconduct constituted reversible error, noted that counsel—by objecting, requesting an admonition, and moving for a mistrial—had done all that could be asked when faced with improper arguments by opposing counsel. As for not suggesting any specific language in the admonition, Ritchie reasonably concluded that it would be inviting error by later challenging language in an admonition that it specifically requested. See City of Neodesha v. BP Corporation, 50 Kan.App.2d 731, 748–51, 334 P.3d 830 (2014). In City of Neodesha, this court held that a party invited error when it later challenges jury instructions that it specifically requested. 50 Kan.App.2d at 748–51.
In addition to giving a prompt, albeit brief, admonishment after its comments, the trial court followed this up after recess with a specific admonition. Moreover, the trial court gave similar instructions during its opening address and instructed the jury in Instruction No. 1 not to view its evidentiary objections as either evidence or its opinion of what the verdict should be.
Because Ritchie's arguments and the cases it relies upon to challenge the sufficiency of the admonition are based on its already rejected argument that the trial judge commented on an ultimate fact issue, we find no reason to depart from the general rule that an admonition to the jury cures the prejudice from an improper admission of evidence. See State v. Navarro, 272 Kan. 573, 582, 35 P.3d 802 (2001). The admonition by the court here was sufficient under these circumstances.
Fees
Both parties have requested attorney fees in accordance with Supreme Court Rule 7.07 (2014 Kan. Ct. R. Annot. 70). Under this rule, we may award attorney fees for services on appeal “in a case in which the district court had authority to award attorney fees.” Rule 7.07(b)(1) (2014 Kan. Ct. R. Annot. 71). That means we can award fees in this case since the district court could grant such an award due to the Escrow Agreement of the parties.
The clearly worded provision of the contract states:
“21. Miscellaneous Provisions.
....
“(i) Attorney's Fees. In the event of any controversy, claim or dispute between the parties arising out of this Escrow Agreement or the breach thereof, the prevailing party shall be entitled, in addition to such other relief as may be granted, to recover its costs and expenses, including without limitation, reasonable attorneys' fees, expert witness fees and investigators' fees, which shall be determined by the court if the matter is litigated or otherwise in a separate action brought for that purpose .”
Thus, the question becomes, is Waste Connections or Ritchie Corporation the prevailing party?
Because Ritchie Corporation breached the implied duty of good faith and fair dealing created by the parties' Escrow Agreement and Waste Connections is entitled to judgment for that breach, we hold that Waste Connections is the prevailing party and is entitled to reasonable attorney fees.
We have carefully examined the attorneys' affidavits filed with the motion in light of the eight factors listed in the Kansas Rules of Professional Responsibility, Rule 1.5 (2014 Kan. Ct. R. Annot. 515) for determining reasonable attorney fees. We deem the requested amount reasonable.
We award Waste Connections $162,889.45 for attorney fees and costs in this appeal.
We affirm.