Hassett v. Dixie Furniture Co., Inc. , 333 N.C. 307 ( 1993 )

425 S.E.2d 683 (1993) 333 N.C. 307

Thomas HASSETT
v.
DIXIE FURNITURE COMPANY, INC.

No. 39PA92.

Supreme Court of North Carolina.

February 12, 1993.

Brooks, Pierce, McLendon, Humphrey & Leonard by Hubert Humphrey, John H. Small and James H. Jeffries IV, Greensboro, for defendant-appellant.

Ben Farmer, Jamestown, for plaintiff-appellee.

WEBB, Justice.

The appellant's first assignment of error deals with the jury instructions in regard to damages. The court instructed the jury that if it found the defendant had breached the 1 March 1986 contract, it could find that the plaintiff was entitled to recover as damages the total amount of the payments due to the plaintiff as if performance had been rendered under the contract.

There was evidence, some of it uncontradicted, that had the plaintiff performed he would have had a considerable amount of expense, including travel between his home in New Jersey and the defendant's facilities in North Carolina, travel to visit dealers throughout the United States, and trips to the Far East to supervise production. The defendant says it was error not to instruct the jury that the damages must be reduced by the amount of expenses the plaintiff would have incurred if he had performed his duties under the contract. We agree that this was error.

A party injured by a breach of contract is entitled to be placed in the same position he would have occupied if the contract had been performed, insofar as this can be done by an award of money damages. Service Co. v. Sales Co., 259 N.C. 400, 131 S.E.2d 9 (1963). He is not entitled to recover for any cost avoided by the breach of the contract. Professor E. Allan Farnsworth in his treatise on the law of contracts says:

[a breach of contract] may have a beneficial effect on the injured party by saving him the further expenditure that he would have incurred if he had performed. This saving will be referred to as cost avoided. If, for example, the injured party is a builder under a construction contract who stops work after the owner's breach, the additional expenditure he has saved is cost avoided.

E. Allan Farnsworth, Contracts § 12.9, at 846 (1982).

We have applied this rule in Peaseley v. Coke Co., 282 N.C. 585, 194 S.E.2d 133 (1973) and Tillis v. Cotton Mills and Cotton Mills v. Tillis, 251 N.C. 359, 111 S.E.2d 606 (1959), by holding that in order to determine damages costs avoided must be deducted from revenue which would have been received if the contract had not been breached.

The appellee argues that pursuant to Arnold v. Charles Enterprises, 264 N.C. 92, 141 S.E.2d 14 (1965), expenses he would have incurred if he had been allowed to complete the contract should not be deducted from the amount he would have received in order to determine damages. Arnold is not precedent for this case. In that case, we held that the plaintiff's damages for the defendant's breach of a contract by failing to appear for a concert as he had contracted to do did not have to be reduced by the plaintiff's expected expenses. In that case, all expenses incurred by the plaintiff in performing his part of the contract had apparently been paid. There was nothing to be deducted from the damages awarded to the plaintiff.

In its second assignment of error, the defendant contends that the court erred when it failed to charge as requested by the defendant on its defenses of accord and satisfaction, compromise and settlement, estoppel, waiver, and ratification. The question raised by this assignment of error is whether there was sufficient evidence for a jury to find that any of these defenses apply.

An accord is a contract under which the obligee promises to accept a stated performance in satisfaction of the obligor's existing duty.... Not until performance, which is called satisfaction, however, is the original duty discharged. Discharge in this way is therefore said to be by accord and satisfaction.

E. Allan Farnsworth, Contracts § 4.24, at 285 (1982) (footnote omitted); Allgood v. Trust Co., 242 N.C. 506, 88 S.E.2d 825 (1955); Sharpe v. Nationwide Mut. Fire Ins. Co., 62 N.C.App. 564, 302 S.E.2d 893, cert. denied, 309 N.C. 823, 310 S.E.2d 353 (1983).

Compromise and settlement is provided for by statute and is close kin to accord and satisfaction. N.C.G.S. § 1-540 provides:

In all claims, or money demands, of whatever kind, and howsoever due, where an agreement is made and accepted for a less amount than that demanded or claimed to be due, in satisfaction thereof, the payment of the less amount according to such agreement in compromise of the whole is a full and complete discharge of the same.

In support of its contention that there was sufficient evidence to submit to the jury on the defenses of accord and satisfaction and compromise and settlement, the defendant relies on the evidence that Mr. Young met with plaintiff and told him that he felt plaintiff had breached the contract by engaging in design services for another furniture manufacturer. Mr. Young testified that he informed the plaintiff that he considered the contract to be terminated and the defendant would stop making payments to the plaintiff. The parties discussed a settlement under which the defendant would continue to pay the plaintiff at the same rate of commission for four months at the end of which time the contract between the parties would be terminated. Mr. Young testified that the parties agreed to this accord.

Following the meeting between the plaintiff and Mr. Young, the plaintiff wrote a letter to Mr. Young setting forth his understanding of the terms of the agreement and asking that the defendant prepare a document incorporating its terms. The defendant had such a contract prepared and mailed an executed copy to the plaintiff. The plaintiff refused to sign the document because, he said, there were things in it which were not part of the agreement. The defendant paid to the plaintiff a commission for four months during which time the plaintiff performed no duties for the defendant.

We hold that this evidence would support a finding by the jury that the parties had reached an accord on the plaintiff's claim against the defendant and the defendant had performed on this agreement, making it an accord and satisfaction. The jury could find this accord and satisfaction from the evidence that the parties discussed a settlement under which the plaintiff would be relieved of all further duties under his contract with the defendant. The defendant's evidence was that the parties agreed to this accord. The agreement was not put in writing and signed by both parties, but the plaintiff accepted the payments for four months and acknowledged by letter that the parties had agreed to an accord. He did not perform any duties for the defendant. The jury could have also found from this evidence that there was a compromise and settlement. The plaintiff introduced evidence contra to the defendant's evidence. Which evidence to believe should be determined by the jury.

The defendant also contends that from the evidence introduced in this case he was entitled to have submitted to the jury the defenses of waiver, estoppel and ratification. It bases its argument on the evidence that the plaintiff accepted payments for four months, knowing that the defendant contended it had no further obligation to the plaintiff under the original contract. It argues that this evidence of acceptance by the plaintiff of performance by the defendant was evidence from which the jury could conclude there was a waiver of the conditions of the original contract. See Wheeler v. Wheeler, 299 N.C. 633, 263 S.E.2d 763 (1980); Towery v. Dairy, 237 N.C. 544, 75 S.E.2d 534 (1953); Lithograph Co. v. Mills, 222 N.C. 516, 23 S.E.2d 913 (1943).

The defendant also says the acceptance of payments for four months by the plaintiff was a misrepresentation of an existing fact upon which the defendant relied to its detriment. The defendant says the misrepresentation was that the plaintiff was accepting the payments pursuant to the new contract between the parties and the plaintiff is estopped to deny the new contract. See Harris v. Harris, 50 N.C.App. 305, 274 S.E.2d 489, appeal dism'd, 302 N.C. 397, 279 S.E.2d 351 (1981).

Finally, the defendant says that the jury could find that by accepting the benefits of the new contract, the plaintiff ratified the contract. See 17 C.J.S. Contracts § 69 (1969). We hold it was not error for the court to refuse to submit the defenses of waiver, estoppel, or ratification. The plaintiff contended he was entitled to the payments under the original contract. He should not be compelled to refuse these payments which would be in the same amount as the payments under the alleged new contract at the risk of being held to have waived his rights under the original contract, being estopped to deny the new contract, or to have ratified the new contract. In light of these circumstances, we hold that the action of the plaintiff in accepting the payments was too ambiguous to support a defense of waiver, estoppel, or ratification.

The defendant next contends that the superior court erroneously instructed the jury with regard to the amount of damages recoverable on its counterclaim. The defendant sought to recover $216,666.00, the amount it paid to two designers it hired to perform the services that would have been performed by the plaintiff. The court instructed the jury that it could award damages only in an amount that the expenditure of the defendant to replace the plaintiff exceeded $325,556.00.

The defendant argues that the court's charge on this feature of the case amounted to a peremptory instruction because $216,666.00 cannot exceed $325,556.00. We agree that the court gave what amounted to a peremptory instruction. If there was error, however, it was in submitting the counterclaim to the jury. The evidence showed defendant was not damaged by the plaintiff's breach of the contract, if there was a breach.

There was no conflict in the evidence concerning the plaintiff's compensation rate under the contract. Both the plaintiff and the defendant's president testified that under the contract, as modified in March of 1986, the defendant was to be paid at the rate of 3/4 of 1% of the defendant's sales. In addition, the parties stipulated that the defendant's monthly sales under the defendant's "Import Dining Room Program" for the period of March 1988 through April 1990 totaled $43,407,518.00. Thus, the total amount the defendant would have paid the plaintiff under the contract between March 1988 and April 1990, was $325,556.00 ($325,556.00 = .0075% of $43,407,518.00). Thus, the total amount of commissions the defendant would have paid under the contract if it had been fully performed was not a fact in issue.

As stated above, a party injured by a breach of contract is entitled to be placed as much as possible in the same position it would have occupied if not for the other party's breach, but the injured party is not to be unduly enriched. Troitino v. Goodman, 225 N.C. 406, 35 S.E.2d 277 (1945). Here, the defendant, if not for the plaintiff's alleged breach, would have paid the plaintiff $325,556.00 during the remainder of the contract. The defendant hired two furniture designers to replace the plaintiff because of the plaintiff's alleged breach. The plaintiff paid these designers a total of $216,666.00 for their replacement services.

A party seeking damages for breach of a contract to perform services, where the injured party has obtained replacement services, is only entitled to recover as money damages the amount by which the cost of the replacement services exceeded the cost of the services that were to be provided under the contract. See Norwood v. Carter, 242 N.C. 152, 87 S.E.2d 2 (1955). To allow the defendant to recover the amount of these replacement services without reduction for the amounts that were to be paid to the plaintiff under the terms of the contract would result in an unjust enrichment of the defendant. This rule is the counterpart of the rule cited above which requires a party claiming damages for breach of contract for the performance of services to reduce his damages by the costs and expenses he was able to save in not performing those services.

We overrule this assignment of error.

The plaintiff assigns error to the denial of his motion to amend his complaint to add a new party. The plaintiff made the motion to make Smith Young a party defendant and to allege unfair and deceptive trade practices. We agree with the Court of Appeals that the court did not abuse its discretion by denying this motion. The motion was heard thirteen months after the action was instituted and only three months before it was calendared for trial. If the motion had been allowed, a new party and a new claim would have been added. This supports the court's conclusion that the amendment "would cause undue delay in the trial of this matter and prejudice" the defendant. The court did not abuse its discretion by denying this motion. News and Observer Publishing Co. v. Poole, 330 N.C. 465, 412 S.E.2d 7 (1992); Smith v. McRary, 306 N.C. 664, 295 S.E.2d 444 (1982); Calloway v. Motor Co., 281 N.C. 496, 189 S.E.2d 484 (1972).

For errors committed in the trial, we reverse the Court of Appeals and order a new trial.

NEW TRIAL.

PARKER, J., did not participate in the consideration or decision of this case.