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IN THE COURT OF APPEALS 04/23/96 OF THE STATE OF MISSISSIPPI
NO. 94-CA-00526 COA

GARLAND MCLEMORE, GENERAL PARTNER OF BREADWINNER EQUITY PLAN, A MISSISSIPPI LIMITED PARTNERSHIP APPELLANT v. MANAGEMENT AND MARKETING CONSULTANTS, INC. APPELLEE

THIS OPINION IS NOT DESIGNATED FOR PUBLICATION AND MAY NOT BE CITED, PURSUANT TO M.R.A.P. 35-B

TRIAL JUDGE: HON. ROBERT L. GOZA COURT FROM WHICH APPEALED: MADISON COUNTY CIRCUIT COURT ATTORNEYS FOR APPELLANT: DON A. MCGRAW, JR. PATRICK M. RAND ATTORNEY FOR APPELLEE: CLAY L. PEDIGO NATURE OF THE CASE: CONTRACTS TRIAL COURT DISPOSITION: JUDGMENT FOR PLAINTIFF/APPELLEE

BEFORE McMILLIN, P. J., COLEMAN AND SOUTHWICK, JJ.

McMILLIN, J., FOR THE COURT: This is an appeal from a judgment rendered in the Circuit Court of Madison County in favor of Management and Marketing Consultants, Inc. (MMC) and against Garland McLemore as general partner of a limited partnership known as Breadwinner Equity Plan. The suit involves certain contractual damage claims asserted by MMC against McLemore arising out of the transfer of a business operation from McLemore to MMC. McLemore raises four issues on appeal. He claims that the trial court erred in assessing him with responsibility for unpaid trade association membership fees. He also attacks on several grounds the admission of certain accounting summaries to substantiate the amount of MMC's claim, which jointly make up his second and third issues. Finally, he claims error in the assessment of punitive damages against him. Upon review, we do not find the alleged errors merit reversal and we, therefore, affirm the trial court's judgment. I. Preliminary Background In order to fully understand what this Court believes to be the critical issues of this case, it is important to have some degree of familiarity with exactly how the business in question was designed or intended to operate; therefore, at the risk of appearing somewhat tedious, the following discussion appears essential. Garland McLemore had, for a number of years, operated a business known as Breadwinner Equity Plan. The business consisted of a trading stamps operation whose clients were primarily a number of truck stops located throughout the country. Under the business plan, Breadwinner would sell trading stamps in bulk to the truck stops at a fixed price. The truck stops would then dispense the stamps to their customers at the time of purchase of petroleum products or other purchases, with the number of stamps dispensed being directly related to the amount of the customer's purchase. The customers were given booklets to hold the stamps, and a book, once full, was redeemable for cash from Breadwinner. The business produced gross profits to Breadwinner in two ways: (a) The redemption value of the stamps, once distributed to the truck stops, was less than the price paid for the same number of stamps when the truck stop purchased them from Breadwinners. By way of example, a roll of 1,000 stamps would normally be sold by Breadwinner to a truck stop for $28; however, those same 1,000 stamps, had a redemption value in the hands of the truck stop's customers of only $20; thereby producing a minimum gross profit to Breadwinner from such sale of $8 per thousand stamps sold. (b) Historically, business experience had shown that a certain percentage of stamps, once distributed by the truck stops, would never be presented by the customer for redemption. Since Breadwinner, and not the truck stop, was responsible for paying for customer redemption, these unredeemed stamps represented additional profit potential for Breadwinner in addition to that set out in (a) above. The stamps were distributed by the truck stops simply as an incentive to potential customers to trade with that particular business as opposed to another not offering such stamps. The cost of purchasing

the stamps from Breadwinner was a non-recoverable business expense to the truck stop, hopefully to be indirectly recovered by the increased volume of sales this promotional activity would produce. In order to assure potential truck stop clients of the integrity of the program, Breadwinner had historically represented that sufficient funds were always on hand to cover potential redemptions of stamps. The internal policy of Breadwinner had been, for a number of years, to deposit $18 from each sale of 1,000 stamps into an interest-bearing account styled a trust account, to be held to cover potential redemptions. As stated earlier, if all stamps were ultimately presented for redemption, it would have required a $20 deposit into the account from each sale of 1,000 stamps; however, historical experience had shown that something less than $16 in redemptions per 1,000 stamps sold could reasonably be expected, so that the $18 deposit actually provided a safety cushion. Redemptions were handled out of an account called the redemption account, which was replenished as necessary out of the trust account. Company practice permitted an annual review of balances on hand in the trust account and redemption account compared with records reflecting outstanding unredeemed stamps, such that any amounts in the account deemed in excess of reasonably anticipated redemption needs could be withdrawn as profit to the company. In its earliest history, the handling of the trust account had been done by an independent trustee; however, after the trustee's death, McLemore had taken over the handling of both the trust and redemption accounts. Truck stops participating in the Breadwinner program were authorized to act as redemption agents for their customers, redeeming full books of stamps in exchange for cash. This on-site redemption method was promoted as one of the more attractive features of the program, in that a customer could redeem a full stamp booklet for cash at the same place he was buying products and did not need to take or send the booklet to a separate redemption center. The truck stop was reimbursed by Breadwinner for these cash redemptions in one of two ways. Some truck stops had authority to draft directly on the redemption account and were given blank checks for that purpose. These truck stops then were required to send in a report along with the actual stamp books as after-the-fact documentation for their authority to draw these reimbursement drafts. Other truck stops sent in the report and supporting booklets and were issued a reimbursement draft from the Breadwinner home office out of the redemption account. One final item of information is necessary to understand some of the issues of this case. The Breadwinner stamps themselves contained an expiration date. They also contained a series number comprised of a letter and a number. The apparent practice was to sell stamps in one year that had an expiration date of January 1 two years distant. By way of example, during the year 1991, the year the business was transferred to MMC, the company was selling stamps with an expiration date of January 1, 1993. During the year, the stamps were intended to be sold in order by the series number, i.e., Series A stamps would be exhausted before beginning sale of Series B, and so on. II. Facts Leading to Litigation McLemore, due to ill health, was desirous of getting out of the day-to-day operation of the Breadwinner business. In furtherance of this purpose, he was ultimately successful in entering into an agreement with Jackie Gardner that Management and Marketing Consultants, Inc. (MMC), a closely held corporation principally operated by Gardner and his wife, Ann, would take over the operation of

the business as of November 1, 1991. In exchange for the right to operate the business, MMC agreed to pay McLemore a commission of 7% of the first one million dollars in annual sales and 5% of annual sales in excess of one million dollars. The details of the agreement were contained in a contract entered into between the parties, entitled "Lease Contract." In addition to the monthly commission due to McLemore, MMC agreed to purchase certain items of inventory in a transaction referred to in the contract as a lease-purchase. Though the agreement itself is difficult to understand on this point, the parties appear to be in agreement that their intent was that, in any month that gross sales met or exceeded $25,000, MMC would pay an additional 2% of gross sales to McLemore as a credit against the amount due for the items of inventory purchased. The agreement provided that McLemore would retain title to and control of his redemption account and that he would also be responsible for the redemption of all stamps sold prior to the effective date of the transfer of business operations to MMC. MMC was to establish new accounts to handle the required escrow deposits from its sales to cover redemption costs. There appears to be no genuine dispute that, as of MMC's takeover of the business on November 1, 1991, the company had sold stamps having a January 1, 1993, expiration through Series B-640. Therefore, under the contract, stamp booklets coming in for redemption after November 1, 1991, containing 1993 stamps of Series B-640 or earlier, or any stamps containing an expiration date prior to January 1, 1993, would be the obligation of McLemore, and stamps after the 1993 Series B-640 would be the responsibility of MMC to redeem. Within less than two months from the time MMC took over the operation of the Breadwinner business, substantial problems began to surface. Insufficient funds were on deposit in McLemore's accounts to cover drafts drawn by truck stops or to cover reimbursement requests sent in by other truck stops for stamps sold by McLemore prior to the transfer. As a result, it became necessary, in order to maintain customer relations and prevent serious damage to the integrity of the business, for MMC to advance its own funds to cover redemptions of stamps sold by McLemore prior to November 1, 1991. The proof at trial showed that MMC took steps to demand that McLemore deposit the sums necessary to cover redemptions chargeable to him under the contract, but that, other than some small sums in the first few weeks, no such funds were advanced by McLemore. In response, MMC suspended payments to McLemore of the percentage of gross sales due him under the contract and, instead, undertook to keep a running total by way of a contemporaneous accounting, which charged to McLemore those amounts advanced by MMC to redeem stamps sold by McLemore prior to the transfer, and which credited him for those amounts that were due him for his monthly lease payment and for inventory purchase. In addition, this accounting charged McLemore for $1,075 for annual dues for a truck stop trade organization that had been due in July of that year, but which were unpaid, and charged McLemore for $4,497 for 1994 Breadwinner stamps that McLemore had ordered prior to November 1, 1991, but which were delivered shortly after MMC took over the business. MMC's justification for these charges to the accounting was a provision of the contract that provided that McLemore "assumes payment for any and all outstanding bills, debts and tax liabilities of the Breadwinner Equity Plan prior to the effective date of this agreement."

This case was tried before the circuit judge as a bench trial. At the conclusion of the proof, the trial court requested proposed findings of fact and post-trial briefs from the parties and took the matter under advisement. He subsequently entered judgment for MMC in the amount of $37,798.48 in contractual damages for McLemore's failure "to pay for certain obligations thereunder," and separately for the $1,075 trade association membership that was past due at the time of the transfer of operation. The total damage award was, therefore, $38,873.48. We note that the accounting sheets offered into evidence by MMC indicated a total amount due of $39,786.03, which is $912.55 more than the actual judgment. No explanation appears in the record for this variance. We can only assume that, based upon some consideration, the trial judge disallowed some item or items in the accounting summary introduced into evidence. In any event, neither party makes an issue of this point, and we have considered the case on the proposition that the accounting record introduced as Plaintiff's Exhibit 16 at trial was the evidentiary basis upon which the trial judge assessed contractual damages. The trial judge additionally assessed McLemore with $16,500 in punitive damages upon a finding that the "breaches of the defendant in failing to honor the redemption agreement, in failing to cooperate on copyright matters and by failing to be available for consultation were willful, and intentional and oppressive." We will address the issues raised by McLemore in his appeal in the same order in which he asserted them in his brief. III. National Truck Stop Association Dues The proof showed that Breadwinner was a dues-paying member of this association, and that it was advantageous from a business standpoint to belong, since membership permitted attendance at the association's annual convention, with the attendant opportunity to meet and associate with present and prospective customers. These dues had fallen due prior to the transfer date of November 1, but were delinquent and unpaid until paid by MMC and charged back to McLemore on the accounting records. McLemore argues in his brief that these dues "were voluntary membership dues . . . not properly classified as an outstanding bill [or] debt" of the business. He cites no authority for this proposition. Memberships in professional associations are a legitimate business expense. There is no proof in the record that McLemore affirmatively canceled the membership in the association prior to the turnover date, and Gardner testified that McLemore had told him of the importance of maintaining the membership. We are unconvinced that the trial court erred in determining that these unpaid dues were a legitimate business expense and, thus an outstanding bill or debt of the business for which McLemore assumed payment under the contract. IV. The Trial Court's Reliance on the Accounting Ledger McLemore seeks to set aside the judgment, or at least the great bulk of it, based upon an attack upon the accounting records we described earlier in this opinion, which were introduced at trial without objection. In fact, at the time of introduction, counsel for McLemore stated into the record the following:

We have been made available all of the original documents maintained by Mr. Gardner. We have checked them against this ledger card and we find no errors in the account as stated and therefore we have no objection to the introduction of this document.

This failure to interpose some contemporaneous objection to the introduction of the document is fatal to all of the errors asserted before this Court on appeal. It is elemental law that a party will not be heard to urge error in the introduction of evidence to which the party interposed no timely objection at trial. Stewart v. Stewart, 645 So. 2d 1319, 1322-23 (Miss. 1994) (citing M.R.E. 103). McLemore attempts now to attack the records on four different theories. First, he suggests that the record is not the best evidence of the obligation of the parties, apparently contending that the redeemed stamps, canceled checks, redemption reports, and related documentation were required to establish the accuracy of MMC's claim. Records such as these accounting sheets, so long as they meet certain threshold criteria, are admissible as independent evidence, based upon the general proposition that "[u]nusual reliability is regarded as furnished by the fact that in practice regularly kept records have a high degree of accuracy . . ." and, on a more practical level, "in actual experience the entire business of the nation and many other activities function in reliance upon records of this kind." Kenneth S. Brown, et al., McCormick on Evidence

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