Olivetti Corp. v. Ames Business Systems, Inc. , 319 N.C. 534 ( 1987 )

Justice Frye

concurring in part and dissenting in part.

I concur in that part of the majority’s opinion which affirms the trial court’s findings that Olivetti intentionally made material misrepresentations upon which Ames reasonably relied, and that portion which rejects the so-called “new business rule.” I dissent from that portion of the opinion which holds that the trial court erred in finding that Ames was damaged by Olivetti’s misrepresentations.

First, I dissent from that portion of the majority opinion (tucked away in footnote number 2) vacating the findings by the trial court which support the $5,200 award to Ames for losses from the sale of two TES-701s. Because Olivetti failed to properly present and discuss the trial court’s award of $5,200 for Ames’ loss from the sale of two TES-701s, this issue is deemed to have been abandoned and therefore is not properly before this Court. See N.C.R. App. P. 28(a) and 16(a).

Rule 28(a) of the North Carolina Rules of Appellate Procedure deals expressly with situations where parties make assignments of error on appeal but do not present or discuss the alleged errors in their brief. The rule plainly states that:

[questions raised by assignments of error in appeals from trial tribunals but not then presented and discussed in a party’s brief, are deemed abandoned.

N.C.R. App. P. 28(a).

On appeal to the Court of Appeals, Olivetti, by assignment of error number 10 based on exception numbers 32 and 33 raised the question regarding the trial court’s award of $5,200 to Ames for losses resulting from the sale of two TES-701s purchased from Olivetti. However, Olivetti failed to present or discuss this question in its brief before the Court of Appeals. Indeed the Court of Appeals acknowledges this omission in its opinion, noting that “Olivetti contests only that part awarded for lost profits.” (Emphasis added.) Olivetti Corp. v. Ames Business Systems, Inc., 81 N.C. App. 1, 15, 344 S.E. 2d 82, 90 (1986). Therefore, pursuant to Rule 28(a), the question concerning the basis for the trial court’s award of damages to Ames for losses on the sale of two TES-701s, raised in Olivetti’s assignment of error number 10, was properly deemed abandoned.

Rule 16(a) of the North Carolina Rules of Appellate Procedure defines the scope of this Court’s review of the Court of Appeals’ decision, in pertinent part, as follows:

Review by the Supreme Court after a determination by the Court of Appeals ... is to determine whether there is error of law in the decision of the Court of Appeals. Except where the appeal is based solely upon the existence of a dissent in the Court of Appeals, review is limited to consideration of the questions properly presented in the new briefs required by Rules 14(d)(1) and 15(g)(2) to be filed in the Supreme Court .... A party who was an appellant in the Court of Appeals, and is either an appellant or an appellee in the Supreme Court, may present in his brief any question which he properly presented for review to the Court of Appeals ....

This case comes to us on discretionary review of the Court of Appeals’ decision. In its new brief, Olivetti, however, again does not contest the trial court’s award of $5,200 to Ames for losses resulting from the sale of two TES-701s. Thus, Olivetti has failed to bring a challenge to this award within the scope of our review as required by Rule 16(a). Moreover, under Rule 16, Olivetti, the appellant in the Court of Appeals, having failed to properly present this issue in the Court of Appeals, could not have raised the issue anew in its brief on appeal to this Court. See N.C.R. App. P. 16(a).

Furthermore, even if the question of whether the trial court’s findings support the $5,200 award to Ames for losses from the sale of the two TES-701s were properly before this Court, I could not agree with the majority’s decision to vacate these findings. Assuming that the majority is correct in stating that the “proper measure of damages for fraudulent misrepresentation in the sales context is the difference between the goods as represented and their actual value at the time and place of acceptance,” I disagree with the majority’s conclusion that “it appears that there was nothing before the court upon which to base its findings” that Ames lost $5,200 from the sale of the two TES-701s.

Defendant’s answer to plaintiffs interrogatories reveals that Ames purchased ten TES-701s from Olivetti, priced at $5,600 each; Ames in turn sold two of the units for a total of $6,000, thus resulting in a loss of $5,200 on the sale of these two units. The contract price at which Ames purchased the TES-701s is regarded as strong evidence of the value of the goods as represented, see HPS, Inc. v. All Wood Turning Corp., 21 N.C. App. 321, 204 S.E. 2d 188 (1974), and the price received for the two TES-701s sold by Ames in an arm’s-length transaction is some evidence of their value at the time of acceptance. Credit Co. v. Concrete, 31 N.C. App. 450, 229 S.E. 2d 814 (1976). Thus there is competent evidence supporting the trial court’s findings and award based on Ames’ $5,200 loss from the sale of the two TES-701s.

Second, I dissent from that portion of the majority opinion which holds that Ames failed to show that it was damaged by Olivetti’s misrepresentations. The majority in its opinion rightly declines to adopt the so-called “new business rule” as the law in North Carolina as a special exception to our existing rules regarding proof of damages. It correctly states that the proper test to apply in the instant case is whether proof of damages has been shown with reasonable certainty. It then incorrectly concludes that Ames failed to do so.

As our Court of Appeals observed, it appears to be a general rule that where the fact of damages is proven with reasonable certainty, most courts allow plaintiffs some latitude in proving the amount of damages in actions involving wrongful conduct such as tort and antitrust actions. See, e.g., D. Dobbs, Remedies, § 3.3 at 151, 153-55 (1973). As the United States Supreme Court has said,

Where the [wrongful conduct] itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence shows the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise.

Story Parchment Co. v. Patterson Parchment Co., 282 U.S. 555, 563, 75 L.Ed. 544, 548 (1931). In another case, it elaborated:

Any other rule would enable the wrongdoer to profit by his wrongdoing at the expense of his victim. It would be an inducement to make wrongdoing so effective and complete in every case as to preclude any recovery, by rendering the measure of damages uncertain. Failure to apply it would mean that the more grievous the wrong done, the less likelihood there would be of a recovery.

The most elementary conceptions of justice and public policy require that the wrongdoer shall bear the risk of the uncertainty which his own wrong has created .... That principle is an ancient one, Amory v. Delamirie, 1 Strange 505, 93 Eng. Reprint 664, and is not restricted to proof of damage in antitrust suits, although their character is such as frequently to call for its application.

Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264-65, 90 L.Ed. 652, 660 (1946) (holding, inter alia, that profits of a rival theater were sufficient to prove lost profits in an antitrust action) (citations omitted).

In the instant case, Ames clearly proved the fact of damages. The trial court found as follows on this question:

31. Olivetti’s conduct in November, 1980, whereby it intentionally misled Ames by falsely telling Ames that its relationship with NBI was all right, and that it was negotiating with NBI for a continuation of the NBI Agreement, and that the Agreement provided for certain support for five years, when, in fact, Olivetti had breached its agreement with NBI and the two companies had agreed not to renew the NBI Agreement, and the Agreement did not provide for the support represented by Olivetti, constituted willful and intentional fraud and unfair and deceptive business acts and practices by Olivetti against Ames. Olivetti’s representations were made to Ames in order to conceal Olivetti’s earlier misrepresentations to Ames and to further deceive Ames and to induce Ames to continue its efforts to market the 701 product; and they did in fact deceive Ames. Ames reasonably relied upon these intentional misrepresentations, to its detriment, in that it continued to expend efforts to market the 701, and borrowed $46,000 to purchase for cash five additional 701’s which it continued to market, and thereby passed up other business opportunities, including an opportunity to become an NBI dealer in early 1981.

The Court finds that Ames’ damages for this continued fraud and unfair and deceptive business acts or practices, are $401,000.00. This figure includes $77,000 in lost profits in 1982, $121,000 in lost profits in 1983, and $203,000 in lost profits in 1984.

As the majority so correctly notes, in a non-jury trial the trial court’s findings of fact are conclusive on appeal if they are supported by any competent evidence. Huski-Bilt, Inc. v. Trust Co., 271 N.C. 662, 157 S.E. 2d 352 (1967). This is true despite the fact that the evidence may be conflicting. Id. Both credibility and weight are matters for the finder of fact, not for the appellate courts. Plott v. Plott, 313 N.C. 63, 326 S.E. 2d 863 (1985); Harrington v. Rice, 245 N.C. 640, 97 S.E. 2d 239 (1957).

In the instant case, the trial judge’s finding that Ames was damaged, that is, the fact of damages, is supported by other findings of fact and by ample competent evidence.

The majority appears to be much swayed by Olivetti’s attempt to depict Ames as an incorrigible loser that could not in any event have made a profit, and it places great stress upon the fact that Ames never in fact showed a profit. The evidence does not support Olivetti’s characterization. Ames was formed in 1978 primarily to market Olivetti products. Perry, its president, testified that the company projected a loss for its first two years of operation, due largely to its start-up expenses. It did in fact lose $13,400 in its first year on sales of $133,903. It lost $24,445 its second year on sales of $238,984. However, there was evidence that during this second year (1979) Ames spent $40,000 promoting the TES-701s, although it did not yet have any to sell. One need not stretch the facts to conclude that without this additional expenditure, Ames would have made a profit in 1979, one year ahead of its projections.

Ames’ loss in 1980 may be similarly attributed to its efforts on behalf of Olivetti’s TES-701. In 1980, Ames had a total loss of $38,421. The trial court found that beginning in August 1979, through October 1981, at least two-thirds of Ames’ time was spent preparing to sell and attempting to sell the 701. This finding is supported by ample evidence. The court also found that Ames slackened its efforts on its other products. This finding is supported both by testimony and by documentary evidence; Ames sold eighteen Olivetti 401s, one of its main products before the TES-701, in 1979, but only seven of these machines in 1980. Ames’ total sales in 1980 fell to $193,417. Of this amount, $88,745 represents sales of the TES-701s, giving the company a gross profit on these sales of only $38,577.60. Ames spent $83,000 in this year promoting the machine. Therefore had Ames not been trying to market the TES-701, it might also have made a profit in 1980. Thus, there is simply no basis for concluding, as Olivetti would have the Court do, that Ames was inherently a losing proposition.

Similarly, Ames presented ample evidence that had Olivetti not reneged on its various commitments regarding the TES-701, Ames would have made profits marketing that machine. Perry testified that Ames did not actually begin presenting demonstrations on the TES-701 or have any models that it could sell until the beginning of 1980. Olivetti sent it a demonstrator model in October of 1979, but the model did not work. Ames was forced to wait for replacement parts. Ozment, Ames’ principal salesman, testified that initial sales of the TES-701 were good. Then, as the trial court found,

18. In October or November, 1980, Ames heard, through a potential customer, a rumor that Olivetti had breached the NBI Agreement and that the Agreement had been terminated. The customer, Mr. J. S. Epley of Charlotte, was considering the purchase of a 701 from Ames, and had heard about these matters. Mr. Epley was disturbed, because he liked Ames and the 701 but did not want to purchase a 701 unless he could be assured of continued service, and support, including hardware and software updates. He conveyed the information and his concern to Ames; and Mr. Jay Ozment, Ames’ salesman, telephoned Olivetti from Charlotte to check on the rumors.

19. Mr. Ozment first talked about the matter with Mr. Gallagher, at Olivetti, the former product manager for the 701. Mr. Gallagher told Mr. Ozment there was no truth to the rumor and that everything was fine between NBI and Olivetti. Mr. Gallagher again stated that the Agreement with NBI was for five years, and said Olivetti was merely negotiating with NBI over price and systems updates. He then referred Mr. Ozment to Mr. Geoffrey Kohart, the then-current Olivetti product manager for the 701. Mr. Kohart confirmed to Mr. Ozment that the rumors were false, and that Olivetti and NBI were merely negotiating over quantities to be shipped. Mr. Kohart agreed to write Mr. Epley a letter confirming these matters.

These findings are in accord with both Perry’s and Ozment’s testimony. The trial court went on to find that Mr. Kohart did write the requested letter, which was introduced into evidence, and that Mr. Epley did then purchase two TES-701s, which purchase is again supported by the evidence.

Nevertheless, the rumors continued and played havoc with Ames’ attempts to sell the TES-701. The trial court found:

21. As a result of the rumors in the trade that NBI had terminated the Agreement [which would render it impossible for Olivetti to properly support the TES-701], it became very difficult for Ames to sell the 701 product in 1981. Ames representatives conferred on several occasions during 1981 with Olivetti representatives, but Ames was never told of the termination of the NBI Agreement. Olivetti kept this information from Ames and its other dealers, and misrepresented the fact that the Agreement had been terminated in order to be able to sell its inventory of 701’s to them.

23. Although Ames eventually sold the five 701’s it purchased from Olivetti in December, 1980, these sales were very slow and difficult because of Olivetti’s secret actions, even with reduced prices and high trade-ins, and Ames lost sales and profits as a result of Olivetti’s actions.

Both Perry and Ozment testified that the persistent rumors that Olivetti would not continue to provide support for the TES-701 was what made it difficult to market. The trial court found that “customers and dealers are very reluctant to purchase a product like the 701 if they cannot be fairly assured of continued hardware and software updates and support,” and again, this finding is amply supported by testimony.

Thus, Ames clearly showed, and the trial court so found, that Olivetti’s actions made it difficult for Ames to sell the TES-701 because of customer fears of losing a source of support for the machine. Ames also showed through its evidence, again reflected in the trial court’s findings, that the opposite result was likely when support was available.

The trial court found that in the summer of 1981, Olivetti sold Ames ten TES-701s at a cheaper price than usual, falsely assuring Ames that the low price was to reduce its inventory so that it could purchase more of them from NBI. As the majority correctly notes, this finding was supported by competent evidence. The trial court also found:

26. At or about the time Olivetti sold the ten 701’s to Ames, it also sold approximately 100 of these products to a consortium of NBI dealers, including one dealer in North Carolina. Olivetti did not inform Ames about this sale. When Ames’ salesman, Jay Ozment, learned about the sale by Olivetti of the 701’s to NBI dealers, including one dealer in Raleigh, he, his wife Teresa, who was Ames’ Marketing Service Representative, and Ames’ serviceman, David Harrison, concluded that Olivetti had destroyed the market for the 701 for Ames, and in so doing had destroyed Ames, and they proceeded to make plans to leave Ames. Mrs. Ozment left Ames in October, 1981. Mr. Ozment and Mr. Harrison left Ames in late October or early November, 1981, and went to work for the new North Carolina dealer for NBI products, a company called IPC. Mr. Ozment and Mr. Harrison opened a Charlotte office for IPC and proceeded to take a substantial amount of Ames’ service business from Ames and to successfully sell Olivetti 701’s and NBI 3000’s in the Charlotte area.

Mr. Ozment sold nine Olivetti 701’s during his first eleven months with IPC, at a price of $9,995 each, plus related accessories, totalling $130,000 in sales of Olivetti equipment. In addition, he sold NBI products similar to the Olivetti products. In his last complete fiscal year with IPC, October, 1982 through September, 1983, Mr. Ozment, using sales practices similar to those he used with Ames, sold $413,000 of NBI products. From the end of September, 1983 until the date of his testimony (May 15, 1984), he had sold $282,000 of NBI products. The gross profit of these products is approximately 35 percent.

This finding is supported by Ozment’s testimony.

Ozment stated flatly that the reason he could sell TES-701s at IPC and not at Ames was that IPC, being itself an NBI dealer, could provide assurances of support for the machine. Ozment also experienced no difficulties in selling NBI’s own product, the 3000, as a salesman for IPC. As Olivetti’s own attorney acknowledged before the trial court, the NBI 3000 and the TES-701 were essentially identical machines, having only “minor cosmetic differences.”

Thus, the evidence appears to amply support the fact that Ames lost sales and profits because of Olivetti’s clandestine behavior.

The majority asserts that Ames has failed to show with reasonable certainty the amount of lost profits. It says:

Assuming, arguendo that the trial court was not precluded from using Ozment’s sales for IPC as a measure of Ames’ damages, there was insufficient evidence before the trial court to measure such damages with reasonable certainty. There is little evidence in the record on the question of whether Ozment would have made the same sales with Ames that he did with IPC. The evidence that is in the record suggests that IPC was able to market its products more widely and sell these products more cheaply than could Ames, regardless of any misconduct by Olivetti. Ames’ only evidence on this question was that Ozment used similar sales techniques for IPC that he had for Ames and that for some time he sold only in the Charlotte area. The judge’s conclusion from this evidence that Ozment would have made any sales for Ames over the next three years, much less that he would have made more than $800,000 worth of sales, was manifestly unsupported and the result of speculation.

Slip op. at 19.

I beg to differ. In cases like the instant case where the fact of damages from a defendant’s misconduct is shown to a reasonable certainty, the innocent victim should not be required to show an exact dollar amount with mathematical precision. See Story Parchment Co. v. Patterson Parchment Co., 282 U.S. 555, 75 L.Ed. 544; Bigelow v. RKO Radio Pictures, 327 U.S. 251, 90 L.Ed. 652. It is true that there can be no absolute certainty that Ozment would have made exactly the same sales for Ames, had Ames had the requisite support for its products, that Ozment made for IPC. Nevertheless, there is more evidence than the majority suggests. There is testimony that Ozment initially sold in the same territory (Charlotte); that he used the same sales methods; that he called upon the same customers he would have called on for Ames (he took his customer lists with him when he left); that he sold the same machine or one with only minor cosmetic differences; that he sold the TES-701s for IPC at a comparable price to that then being charged by Ames (he sold IPC’s TES-701s for less than ten percent less than Ames was charging) and the NBI 3000 for almost $4,000 more; and that he was able to make these sales for IPC where he had been unable to do so for Ames because of the support factor. Due to Olivetti’s own actions in making the TES-701 unmarketable by anyone not an NBI dealer, Ames is not in a position to show any closer figures of its lost sales than these, achieved by the same salesman selling the same or virtually the same machine to the same customers at comparable or greater prices in the same territory. The trial court so found, saying of Perry’s lost profit computations, “The Court finds that these projections are reasonable, particularly in view of the fact that Olivetti’s wrongful conduct caused Ames to take actions which make more definite projections difficult to ascertain.” Because Olivetti has placed Ames in this position, it should not be permitted to complain that Ames’ damages cannot be measured with the exactness and precision that might otherwise be possible. Accordingly, I believe not only that Ozment’s sales for IPC are a proper measure of Ames’ lost sales, but also that it is a just and reasonable inference that Ozment would have made approximately the same sales for Ames.

I also note that the majority states that the trial court concluded that the proper measure of damages was the sales Ozment made for IPC during the three years after Ozment left Ames. Slip op. at 13. What the trial court actually found was that Perry projected that Ames’ profits would have been $77,000 in 1982, $121,000 in 1983, and $203,000 in 1984, based upon Ozment’s sales for IPC and Perry’s experience with operating costs and with related service sales and costs. This finding is supported by Perry’s testimony. Thus, Perry was not basing his figures on IPC’s profits; he was basing them on Ozment’s sales and applying Ames’ own historical experience to these sales to determine what profit Ames would have made had Ozment made these sales for Ames. Use of this method, on the facts of this case, permits a just and reasonable inference as to the extent of Ames’ damages.

The trial judge did find that had it not been for Olivetti’s fraud, Ames could have become an NBI dealer. The majority holds that this finding is not supported by competent evidence. It says:

In order for Ames to show that it was deprived of an opportunity to make profits, it must first show that there was in fact such an opportunity. The trial judge found as a fact that Ames, in reliance on Olivetti’s misrepresentations, passed up the opportunity to become an NBI dealer. We hold, however, that there was no competent evidence to support this finding. There was no evidence that NBI ever offered a dealership to Ames. On the contrary, the testimony from Downs, the NBI representative, was that no such offer was made. Although a firm offer is not a prerequisite for recovery under a lost opportunity theory, Rannbury-Kobee Corp. v. Miller Machine Co., Inc., 49 N.C. App. 413, 271 S.E. 2d 554 (1980), Downs also testified that Ames did not appear to qualify financially for such an undertaking. Perry, Ozment, and Harrison, all employees or former employees of Ames, testified that after the meeting with Downs, Ames decided not to pursue becoming an NBI dealership. While these witnesses were competent to testify to their own intentions, they were not competent to testify that NBI would ever have made a dealership offer to Ames. There was, therefore, no competent evidence before the judge to support his finding that Ames could have become an NBI dealership.

Slip op. at 16.

I am unable to understand the majority’s reasoning in this respect. Perry gave positive testimony that he could have raised the money required had Ames decided to pursue a dealership with NBI. If, as the majority opinion suggests, Ames’ ability to raise the necessary money were the only reason Ames would not have become an NBI dealer, I fail to see why Perry’s testimony about the amount of money available to him is not competent evidence, while Downs’ testimony that Ames did not “appear” to qualify financially is competent, especially in light of the fact that Ames never submitted a financial statement to NBI. Downs’ testimony supports a conclusion that Ames’ supposed financial deficiency was its only drawback from NBI’s standpoint. Downs said that aside from any financial question,

I was very much impressed with the three other people that were in the room when we had those discussions. They seemed to have — they were very committed to and very knowledgeable about a related product, the Olivetti 701 which NBI manufactured for Olivetti during that period of time. That I had a comfort level that they could be successful, those people could be successful in selling, supporting, and servicing the NBI product line.

Perry testified that Ames failed to pursue the NBI dealership further because the NBI machine was essentially identical and more expensive than the TES-701, and he would thus only be competing with himself if he took on the NBI line; Downs also testified that although Ames could have continued to be an Olivetti dealer as far as NBI was concerned, NBI would not have allowed Ames to sell both the TES-701 and the NBI 3000 for that very reason. Accordingly, I believe that there is sufficient evidence to support the trial judge’s findings.

Furthermore, I do not agree that in order to recover damages, Ames had to show that it would have become an NBI dealer but for Olivetti’s fraud. In his finding summarizing Perry’s computation of damages, the trial judge did say that Perry projected these profits “as an NBI dealer.” However, as we have said before, the purpose of the requirement that the trial judge make findings of fact is so that the reviewing court may determine “ ‘from the record whether the judgment — and the legal conclusions that underlie it — represent a correct application of the law.’ ” Patton v. Patton, 318 N.C. 404, 406, 348 S.E. 2d 593, 595 (1986). The findings should indicate the evidence relied upon by the judge. Id. What Perry actually said in the testimony upon which this finding is based was that these profits were his projections “if properly supported by Olivetti or if I had taken the MBI [sic] product . . . .” His testimony described his written calculations, introduced into evidence, and entitled “Damages through loss of opportunity to sell properly supported TES 701 or to convert Ames to NBI dealership.” Perry himself made no distinction in reaching his figures. Indeed, the testimony reflected in the trial judge’s findings, was that the product lines were essentially the same. The critical point, from Perry’s testimony about the necessity for having support and Ozment’s testimony that the factor that enabled him to sell the TES-701s for IPC was the availability of support, appears to be Ames’ ability to get this support, which it would have done either if Olivetti had honored its commitments or if Ames had become an NBI dealer. Accordingly, the opportunity to become an NBI dealer was not critical to Perry’s proof of lost profits.

For all of the above reasons I would hold that Ames has proved its damages with reasonable certainty and that the trial court did not err in so finding.

Chief Justice Exum and Justice MARTIN join in this concurring and dissenting opinion.