Abernathy v. Knych

61 S.W.3d 207, 76 Ark. App. 127, 2001 Ark. App. LEXIS 850
CourtCourt of Appeals of Arkansas
DecidedDecember 5, 2001
DocketCA 00-1225
StatusPublished
Cited by2 cases

This text of 61 S.W.3d 207 (Abernathy v. Knych) is published on Counsel Stack Legal Research, covering Court of Appeals of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Abernathy v. Knych, 61 S.W.3d 207, 76 Ark. App. 127, 2001 Ark. App. LEXIS 850 (Ark. Ct. App. 2001).

Opinions

Sam BIRD, Judge.

Appellants William G. (Bill) and Anne Abernathy, husband and wife, doing business as Wonder City, Inc., bring this appeal from an order of the Circuit Court of Crittenden County, which granted a motion for directed verdict in favor of appellees, Kenneth J. Knych, Inc., Wonder City Restaurant, Inc., and Kenneth J. Knych, Michael Freyaldenhoven and William Kendall Thomas, individually. From our review of the record, considering the evidence in the light most favorable to appellants, we hold that substantial evidence was presented by appellants that would support a finding by the jury that appellees’ contract with Schneider National Carriers for the operation of a cafeteria was terminated for cause. Accordingly, we reverse and remand for a new trial.

The appellants in this case operated a restaurant under the name of Wonder City, Inc., and had entered into an agreement with Schneider National Carriers, which is a trucking firm, to provide Schneider with cafeteria services at its trucking station in West Memphis. The appellants sold their restaurant business on June 30, 1995, to appellees. Under the contract of sale, the appel-lees were granted the right to continue to provide cafeteria services to Schneider’s West Memphis Center and, in return, appellees agreed to pay to the appellants six percent of the gross sales of the cafeteria operation at Schneider for a ten-year period. The contract also provided:

in the event the Schneider National Carriers Cafeteria operation is lost by them for cause, [appellees] individually shall be hable to Seller in the amount of $150,000.00 for the first year of loss and said liability shall be reduced ten percent (10%) for each year of the remaining ten (10)-year contract in the Schneider National Carriers’ phase of said contract.

On July 1, 1995, appellees began operating the cafeteria for Schneider. On February 13, 1996, Schneider entered into a written contract with appellees for the operation of the cafeteria at Schneider’s West Memphis trucking center. Among other things, this contract provided:

1.1 Term. The initial term of this Agreement is one (1) year from the Effective Date. This Agreement shall continue after the initial one (1) year term on a month to month basis until terminated by either party with or without cause on sixty (60) days prior written notice. After the initial one year term, the parties may adjust the specific terms, commissions or guarantees of this Agreement where circumstances beyond the control of either party require adjustments.
1.2 Termination for Cause. Notwithstanding Section 1.1, in the event that either party defaults in the performance of any of its duties or obligations under this Agreement, which default is not cured within ten (10) days after written notice thereof is given to the defaulting party by the non-defaulting party specifying the default, then the party not in default may, by giving written notice thereof to the defaulting party, immediately terminate this Agreement.

On January 7, 1998, Schneider notified appellees by letter that it was terminating its contract with them, effective sixty days thereafter. Because the appellees refused to pay to appellants the money that the appellants believed was due under the June 30, 1995, contract because of its termination, appellants filed a complaint against appellees, alleging that Schneider’s termination of its contract with appellees was for cause. Therefore, appellants alleged, appellees were obligated to pay to appellants, in accordance with the formula set forth in their contract, the sum of $120,000.

During the jury trial, Bill Abernathy testified that he was the former owner of Wonder City Cafeteria. He stated that he began working with Schneider by providing catering service for its driver appreciation events, called “handshakes.” Schneider completed its new cafeteria facility at its truck stop location and entered into an agreement under which Abernathy agreed to also provide food services for Schneider’s West Memphis cafeteria.

He testified that he sold all of the real estate, building, furnishings, and equipment of Wonder City Cafeteria to the appellees. In addition, he stated that he sold appellees the right to provide food services to Schneider’s cafeteria. Abernathy testified that appellees lost the right to operate the Schneider cafeteria for cause during the third year that they were in business and that, pursuant to the contract, appellees owed him $120,000.

Abernathy stated that the cafeteria was initially run “pretty well” under the managership of appellee Michael Freyaldenhoven. However, he stated that when Ed Camper began managing the cafeteria, problems began to arise, i. e., more drivers began complaining about the lack of service, lack of food, the temperature of the food, the cleanliness of the facilities, and the lack of the use of gloves. Abernathy said that under the contract, he was to have the right of approval over certain matters concerning the operation, but that appellees never sought his approval on any matters. He said that when he offered the appellees suggestions about the cafeteria’s operation, he was ignored to the point that he finally stopped telling them anything.

Abernathy stated that in August 1996, he received a letter from Doug Helton, Operation Support Manager for Schneider, in which Schneider placed appellees on a forty-five day probation period for having received no response from appellees regarding complaints. The letter stated that if the problems that were detailed in the letter were not improved upon, the company would find a new vendor. Abernathy stated that after he learned that the contract might be terminated, he spoke to appellees Knych and Thomas, but that no changes in the operation of the restaurant occurred.

Through Abernathy’s testimony, the appellants introduced a copy of Schneider’s letter informing appellees that their contract was to be terminated in sixty days. In addition to notifying appellees of the termination of the food service agreement, Schneider’s letter informed appellees that “there were service and quality issues that Schneider was looking to improve upon.”

On cross-examination, Abernathy admitted that he was aware that Best Vendors had been hired by Schneider to oversee their entire cafeteria operation and that Best Vendors was taking bids on the operation. He also admitted that he had made a bid on the operation but had not informed appellees and that Best Vendors had changed the terms of the operation of the cafeterias by requiring the operator to pay rent for use of the cafeteria space and to pay Schneider a percentage of the gross sales. Additionally, he admitted that when he operated the Schneider cafeteria, he had not had to pay Schneider rent or a percentage of his gross profits, and that appellees’ contract with Schneider did not require such payments.

Two former employees of the Abernathys, who worked for appellees after the restaurant business was sold, testified that after appellees took over the business, the food quality at Schneider’s restaurant deteriorated because appellees quit using some seasonings and spices that should have gone into the food, switched from fresh to frozen vegetables, prepared food from day-old meat, and often re-used food a second day.

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Cite This Page — Counsel Stack

Bluebook (online)
61 S.W.3d 207, 76 Ark. App. 127, 2001 Ark. App. LEXIS 850, Counsel Stack Legal Research, https://law.counselstack.com/opinion/abernathy-v-knych-arkctapp-2001.