KOSRAE STATE COURT TRIAL DIVISION
Cite as Jackson v. George
10 FSM Intrm. 523 ( Kos. S. Ct. Tr. 2002)
 
[10 FSM Intrm. 523]
 
DOROTHY JACKSON,
Plaintiff,
 
vs.
 
STEVEN GEORGE,
Defendant.
 
CIVIL ACTION NO. 2-00
 
RULING ON DAMAGES; ORDER
 
Aliksa B. Aliksa
Associate Justice
 
Trial: October 23, 2001
 
Decided: January 2, 2002
 
APPEARANCES:
 
For the Plaintiff:                        Charlton Timothy, trial counselor
                                                   P.O. Box 479
                                                   Lelu, Kosrae FM 96944
 
For the Defendant:                  Canney Palsis, Esq.
                                                  Directing Attorney
                                                  Micronesian Legal Services Corporation
                                                  P.O. Box 38
                                                  Lelu, Kosrae FM 96944
 
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HEADNOTES
 
Contracts ) Damages
     When a car rental agreement provides that the lessee shall pay to the lessor all costs and expenses incurred as a result of loss or damage to the rental vehicle, then the lessor has a duty to accept the damaged vehicle and simply charge the repair costs to the lessee. Jackson v. George, 10 FSM Intrm. 523, 525 (Kos. S. Ct. Tr. 2002).
 
Contracts ) Damages
     When the police accident report and testimony at the trial shows that the left front fender was not damaged in the accident, repair costs for the left front fender cannot be charged to the defendant. Jackson v. George, 10 FSM Intrm. 523, 525 (Kos. S. Ct. Tr. 2002).
 
Contracts ) Damages
     Generally, lost profits may be recovered in breach of contract cases, provided that certain evidentiary requirements are satisfied. Jackson v. George, 10 FSM Intrm. 523, 526 (Kos. S. Ct. Tr.
 
[10 FSM Intrm. 524]
 
2002).
 
Contracts ) Damages
     The terms "lost profits" and "revenues" are not interchangeable as they have entirely different meanings. "Revenues" are the gross receipts of the business. The term "profits" means the gross proceeds of a business transaction less the costs of the transaction. In other words, profits equal the revenues minus the costs. Jackson v. George, 10 FSM Intrm. 523, 526 (Kos. S. Ct. Tr. 2002).
 
Contracts ) Damages
     Lost profits may be presumed to a natural result of a breach of contract, but a plaintiff's claim for lost profits must be clearly established. First, the plaintiff must show that there would have been a profit. The plaintiff must also prove costs of the business because it is impossible to prove profits without first proving costs. Jackson v. George, 10 FSM Intrm. 523, 526 (Kos. S. Ct. Tr. 2002).
 
Contracts ) Damages
     If the plaintiff fails to produce satisfactory evidence of costs, then the plaintiff's claim to lost profits must fail, because the trier of fact has no basis to compute profits. Jackson v. George, 10 FSM Intrm. 523, 526 (Kos. S. Ct. Tr. 2002).
 
Attorney, Trial Counselor and Client ) Fees; Contracts
      Contract provisions for the payment of attorney's fees will be enforced only to the extent that the fees demanded are reasonable. In debt collection cases, the amount awarded for attorney's fees should not exceed 15 percent of the outstanding principal and interest. Jackson v. George, 10 FSM Intrm. 523, 526 (Kos. S. Ct. Tr. 2002).
 
Attorney, Trial Counselor and Client ) Fees
     The court must first determine the reasonableness of a plaintiff's claim for attorney's fees and costs. Any award of attorney's fees must be based upon a showing and a judicial finding, that the amount of fees is reasonable based on detailed supporting documentation showing the date, the work done, and the amount of time spent on each service for which compensation is claimed. Jackson v. George, 10 FSM Intrm. 523, 527 (Kos. S. Ct. Tr. 2002).
 
Contracts; Insurance
     When there was no legal requirement for the lessor to offer insurance to the lessee in a car rental agreement, the lessor's failure to offer insurance to the lessee in a rental agreement does not serve as a defense to the damages assessed against the lessee for an accident. Jackson v. George, 10 FSM Intrm. 523, 527 (Kos. S. Ct. Tr. 2002).

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COURT'S OPINION

ALIKSA B. ALIKSA, Associate Justice:

     This matter involves claims of breach of contract based upon a car rental agreement and damage to the rental vehicle. Partial summary judgment on the issue of liability was granted in favor of the Plaintiff by Order entered on June 28, 2000. Trial on the issue of damages was held on October 23, 2001. Charlton Timothy appeared for the Plaintiff. Defendant was represented by Canney Palsis, MLSC. The following witnesses testified at the trial: Mills R. Sigrah, Palmerson Charley, Sargeant Andy Robert and the Defendant. Defendant filed a Trial Brief on October 23, 2001. Both parties filed written summations of their closing arguments on November 26, 2001.

[10 FSM Intrm. 525]

      Plaintiff claims three categories of damages: repair costs for the damaged rental vehicle; lost profits or revenues, and attorneys' fees. Each category of damage is addressed in turn below.

1. Repair Costs for the Damaged Rental Vehicle.

     The damaged rental vehicle was the subject of car rental agreement # 1017. Pursuant to the police report filed on the accident and the testimony received at trial, license plate # 2703 was issued to the rental vehicle rented by the Defendant and damaged during the rental period on August 22, 2001.

     Car rental agreement # 1017 contains the applicable damage provisions in paragraph 2.f as follows: "Lessee shall pay Lessor on demand all Lessor's costs and expenses including from loss or damages to the vehicle while on rental, whether or not due to Lesse[e]'s fault . . . ." When a car rental agreement provides that the lessee shall pay to the lessor all costs and expenses incurred as a result of loss or damage to the rental vehicle, then the lessor has a duty to accept the damaged vehicle and simply charge the repair costs to the lessee. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987). This is what happened here. Lessor had accepted the damaged car from the lessee and has charged the repair costs to the Lessee. The Lessor had taken the damaged rental car to PKC Auto Body Repair to be repaired. Lessor also ordered several parts necessary for repair of the rental car.

     At the trial, Plaintiff presented testimonial and documentary evidence of the repair costs expended on the damaged rental vehicle. One invoice from PKC Auto Body Repair, listed and charged for labor and services for repair of the left front fender, left front and rear door, door center post. The total amount charged for these services was $600. The invoice also charged $200 for providing paint for the damaged portions of the car.

     The Defendant objected to the charges assessed for repair of the left front fender, and argued that the left front fender was not damaged in the accident. Based upon the police report on the accident and testimony at the trial, I conclude that the left front fender was not damaged in the accident. Therefore, repair costs for the left front fender cannot be charged to the Defendant. The repair charge of $600 listed three items, including the left front fender. Accordingly, the repair charge for the left front fender is rejected, and the $600 repair charge is reduced to $400 for the remaining two items. Plaintiff may recover a total of $400 for repair and $200 for paint on the PKC Auto Body Repair costs for a total of $600.

     Plaintiff also presented documentary and testimonial evidence on the cost of parts purchased for the damaged rental vehicle. Plaintiff ordered parts in the total amount of $250 for repair of the damaged vehicle. Plaintiff may recover the entire $250 expended for purchase of parts.

     Plaintiff shall recover a total of $850 in damages from the Defendant for costs of repair and parts to the damaged rental vehicle.

2. Lost Profits or Revenues.

     The Plaintiff claims a total of 182 days of rental revenue at $40 per day, for a total of $7,280. Car rental agreement # 1017 contains the applicable damage provisions in paragraph 2.f as follows: "Lessee shall pay Lessor on demand all Lessor's costs and expenses including from loss or damages to the vehicle while on rental, whether or not due to Lesse[e]'s fault . . . ." Plaintiff claims lost profits or revenues for a period of 182 days that the damaged rental vehicle was in the repair shop and out of rental service. Plaintiff argues that under the case of Kihara Real Estate, Inc. v. Estate of Nanpei, 6 FSM Intrm. 502 (Pon. 1994), he may recover lost profits, to put him in the position he would have

[10 FSM Intrm. 526]

been in, had the Defendant not breached the contract and damaged the vehicle. Generally, lost profits may be recovered in breach of contract cases, provided that certain evidentiary requirements are satisfied. See Howard O. Hunter, Modern Law of Contracts  14.03[3][b] (1993).

     In this case, Plaintiff uses the terms "lost profits" and "revenues" interchangeably. These terms are not interchangeable as they have entirely different meanings. "Revenues" are the gross receipts of the business. Black's Law Dictionary 1319 (6th ed. 1990). Here, Plaintiff claims the lost revenues of the rental car: $40 rental fee per 24 hour period. The term "profits" means the gross proceeds of a business transaction less the costs of the transaction. Id. at 1211. In other words, profits equal the revenues minus the costs. In this case the costs of the Plaintiff's rental car business would include some or all of the following items: purchase cost of the rental car, labor costs, taxes, license fees, cost of regular maintenance, fuel and other overhead costs. Plaintiff's profits would be the net amount remaining from the rental revenue, after the costs are deducted. The net proceeds from daily rental of the vehicle would be less than $40 per day.

     Lost profits may be presumed to a natural result of a breach of contract. However, Plaintiff's claim for lost profits must be clearly established. First, the Plaintiff must show that there would have been a profit. One way to prove lost profits on a contract is to show a history of profitability in the same types of transactions. Plaintiff must also prove costs of the business. It is impossible to prove profits without first proving costs. If the Plaintiff fails to produce satisfactory evidence of costs, then the Plaintiff's claim to lost profits must fail, because the trier of fact has no basis to compute profits. Howard O. Hunter, Modern Law of Contracts  14.03[4][b]-[c] (1993).

     In this case Plaintiff did not provide satisfactory proof of revenues for the rental car. First, Plaintiff did not submit any evidence showing the rental history of the subject rental car and the history of revenues received for the car. Plaintiff did not submit any evidence which showed the numbers of days prior to August 22, 2001 that the subject rental vehicle was actually rented for the $40 daily rental fee. Without this information, it is impossible to determine the rental history of the rental car and the foreseeable lost revenues of the rental car while it was unusable during the repair time. Furthermore, Plaintiff did not provide satisfactory proof of costs. Plaintiff did not submit any evidence of costs allocated to the subject rental car. These costs might include: payments made on the purchase cost of the rental car, labor costs, taxes, license fees, regular maintenance, fuel and other overhead costs. Plaintiff has failed to provide evidence of rental and revenue history, and costs allocated to the subject rental car. Plaintiff has failed to provide any evidence in support of his claim for lost profits and has failed to meet his burden of evidentiary proof on this category of damages. Plaintiff's damage claim for lost profits fails.

3. Attorney's Fees

     Plaintiff claims attorney's fees as a component of damages in this matter. The car rental agreement # 1017, at paragraph 2.e. provides for the payment of attorney's fees as follows: "Lessee shall pay Lessor on demand Lessor's costs, including reasonable attorney's fee, incurred in collecting payments due from Lessee under this Agreement . . . ." Plaintiff claims the amount of $1,220 in attorney fees. Plaintiff claims that a total of $600 was paid to two different counsels as retainer fees. Plaintiff also claims an additional $620 in attorney's fees for services rendered by the second counsel.

     Provisions in a contract for the payment of attorney's fees will be enforced only to the extent that the fees demanded are reasonable. Bank of Hawaii v. Jack, 4 FSM Intrm. 216, 219 (Pon. 1990). In debt collection cases, the amount awarded for attorney's fees should not exceed 15 percent of the outstanding principal and interest. Id. at 220. Thus, the maximum amount of damages that may be awarded for attorney's fees may not exceed 15 percent of $850.

[10 FSM Intrm.. 527]

     The Court must first determine the reasonableness of the Plaintiff's claim for attorney's fees and costs. Senda v. Creditors of Mid-Pacific Constr. Co., 7 FSM Intrm. 664, 673 (App. 1996). Any award of attorney's fees must be based upon a showing and a judicial finding, that the amount of fees is reasonable. Bank of the FSM v. Bartolome, 4 FSM Intrm. 182, 184 (Pon. 1990). The Plaintiff must submit detailed supporting documentation showing the date, the work done, and the amount of time spent on each service for which a claim for compensation is made. Jack, 4 FSM Intrm. at 219.

     Plaintiff, at trial, submitted a claim for attorney's fees, including fees paid as retainer fees, and also for additional fees charged for the preparation of the case for trial. Plaintiff shall submit detailed supporting documentation, in the form of an affidavit, showing the date, the work done, and the amount of time spent on each service for which damages are claimed. Plaintiff shall file and service his affidavit and any supporting documentation no later than January 14, 2002. Defendant shall file and serve any response to the Plaintiff's submission no later than January 24, 2002.

4. Plaintiff's Failure to Offer Insurance.

     Defendant, in defense of the Plaintiff's claim for damages, argued that in other rental car agreements made between the parties, the Plaintiff had offered the Defendant the option to purchase insurance. The Defendant did testify, that in other car rental agreements with the Plaintiff, the Plaintiff did offer insurance, and that the Defendant did accept the offer to purchase insurance on the rental car, which then limited the liability of the Defendant.

     In the subject rental agreement, # 1017, insurance was not offered by the Plaintiff to the Defendant. Defendant has not offered any legal authority to this Court which would require the Plaintiff to offer insurance to the Defendant. This Court could not find any legal authority which would require the Plaintiff to offer insurance to the Defendant. Consequently, I conclude that there was no legal requirement for the Plaintiff to offer insurance to the Defendant in car rental agreement # 1017. Plaintiff's failure to offer insurance to the Defendant in the subject rental agreement does not serve as a defense to the damages assessed against the Defendant.

5. Judgment.

     Judgment shall be entered in favor of the Plaintiff and against the Defendant. Plaintiff shall recover a total of $850 in damages from the Defendant for costs of repair and parts to the damaged rental vehicle. Plaintiff shall also recover attorney's fees in an amount to be determined, after briefing by the parties. The judgment shall be entered following the Court's determination and award of reasonable attorney's fees.

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