Creative v. Bale ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE
CREATIVE KITCHENS & ) C/A NO. 03A01-9611-CH-00379
INTERIORS, Inc., )
)
Plaintiff/Counter- )
Defendant/Appellant, )
)
FILED
)
v. ) August 26, 1997
)
) Cecil Crowson, Jr.
WILLIAM F. BALE AND BECKY BALE, ) APPEAL AS OF AppellateFROM Clerk
RIGHT C ourt THE
) CAMPBELL COUNTY CHANCERY COURT
Defendants/Counter- )
Plaintiffs/Third-Party )
Plaintiffs/Appellees, )
)
v. )
)
)
SUSAN SPROUSE SEALS, )
)
Third-Party Defendant/ ) HONORABLE BILLY JOE WHITE,
Appellant. ) CHANCELLOR
For Appellants For Appellees
GAIL F. WORTLEY CHARLES A. WAGNER III
Knoxville, Tennessee Wagner, Myers & Sanger, P.C.
Knoxville, Tennessee
OPINION
AFFIRMED AND REMANDED Susano, J.
1
Creative Kitchens & Interiors, Inc. (CKI) sued William F.
and Becky Bale (“the Bales”) for specific performance of two
contracts for design consulting services and the furnishing of
cabinets and counter tops for the Bales’ home. The Bales filed a
counterclaim against CKI and a third-party complaint against Susan
Sprouse Seals (“Seals”), CKI’s president. After reaching a
settlement agreement (“the Agreement”), the parties agreed to stay
all court proceedings, pending compliance with the terms of the
Agreement. When CKI’s performance under the Agreement did not
satisfy the Bales, they amended their claims to demand damages for
an alleged breach of the Agreement and alleged violations of the
Tennessee Consumer Protection Act of 1977, T.C.A. § 47-18-101, et
seq. (“the Act”). After a bench trial, the trial court found that
CKI and Seals had breached the Agreement, and that the Bales were
therefore entitled to recover an overpayment of $23,468.01,
attorney’s fees of $8,240.49, and the remainder of an escrow
payment they had deposited with the court; however, the court
declined to award treble damages under the Act as requested by the
Bales. CKI and Seals appealed, raising two issues which present
the following questions for our review:
1. Does the evidence preponderate against
the trial court’s decision?
2. Did the trial court err in entering a
judgment against the third-party defendant
Seals?
As an additional issue, the Bales raise the question of whether
the trial court erred in failing to award them treble damages
under the Act. We affirm.
2
I
The Bales originally retained Seals, the president of
CKI, as a consultant to aid in remodeling their kitchen and other
parts of their home, paying her $750 as a down payment on May 4,
1994. The Bales subsequently signed a contract with CKI for
Seals’ services at a rate of $75 per hour. After the Bales
expressed their desire to purchase high-quality cabinets, Seals
displayed such cabinets to them at the CKI showroom. Seals
assured the Bales that their new cabinets would be identical or
comparable to those in the showroom. She also indicated that the
cabinets would be of solid-wood construction; in fact, Ms. Bale
testified that Seals laughed at the existing cabinets in the
Bales’ home because they were made of flake-board.
Relying on Seals’ representations regarding the cost
and quality of the cabinets and counter tops, the Bales entered
into two contracts with CKI in December, 1994. The contracts
provided for the installation of various cabinets and counter
tops in the Bales’ home and called for the Bales to deposit 50%
of the total price in advance.
The relationship between the parties began to
deteriorate in May, 1995, when the Bales decided that the price
of the cabinets, counter tops, and other fixtures--which exceeded
$50,000-- was exorbitant in comparison to market prices for
similar materials. The Bales chose to proceed with the contract
for the cabinets, but they requested that the contract for the
counter tops be canceled and that the deposit for the counters be
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applied to the price of the cabinets. CKI and Seals subsequently
refused to install the kitchen cabinets until further amounts
were paid by the Bales. Seals also refused the Bales’ requests
regarding the counter top contract. When the Bales failed to pay
the remainder of the contract price, CKI filed this action
seeking specific performance of the contracts. After the Bales
filed an answer, counterclaim and third-party complaint, the
parties entered into the Agreement, whereby CKI and Seals would
deliver and install the cabinets, and the Bales would make
specified payments. CKI and Seals also consented to cancel the
contract for the counter tops and to apply that deposit against
the price of the cabinets. In the meantime, the Bales had paid
into court an escrow deposit of $30,720.75, representing the
balance owed under the contracts for full performance. The
Agreement states that CKI could draw upon the escrow funds only
“after the Bales determine that all the cabinets meet the
contract specifications, are equal to the sample as displayed in
CKI’s office, and fit the Bales’ home.” The Agreement also
provides, in pertinent part, that
Seals shall provide services... as necessary
to assure that the cabinets are of the
highest quality and properly installed in the
Bales’ residence.
* * * *
The parties agree to communicate by telephone
and to cooperate together to carry out this
agreement.
Time is of the essence in the performance of
this agreement. Should CKI fail to timely
deliver and install the cabinets as specified
in this agreement, the Bales retain all their
rights and remedies for breach of this
agreement. Should litigation be required to
enforce this agreement or to seek recovery or
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damages for breach of this agreement, the
prevailing party or parties shall be entitled
to recover its, her, his or their reasonable
attorney fees and costs.
The Agreement was signed by the Bales and twice by Seals, both
individually and as president of CKI.
The first cabinets were delivered on October 5, 1995.
Upon inspection, the Bales found the cabinets to be of much lower
quality than those which Seals had displayed in the CKI showroom;
in fact, they were constructed of flake-board. The general
contractor for the project testified that the cabinets were
“factory type,” rather than custom-made, solid wood cabinets. In
addition, there were multiple problems associated with the
installation of the cabinets. The trial court found:
The [first] cabinets were delivered and were
constructed of flake-board. They did not
meet the sample shown provision and they were
not cut to fit properly in the Bales’ home.
There were many, many problems with the first
set of cabinets.
(Emphasis in original).
The Bales attempted several times, without success, to
contact Seals, hoping to have her visit the house and endeavor to
resolve the problems with the cabinets. The trial court found
that Seals “was not on the job site and would not communicate
concerning the problems with the [first set of] cabinets.” The
Bales then terminated the Agreement with CKI and Seals because of
their defaults, arranged for the removal of the nonconforming
5
cabinets, and canceled the second delivery of cabinets at no
charge to any of the parties.
After the Bales amended their claims to seek damages
for breach of the Agreement and violations of the Tennessee
Consumer Protection Act, CKI and Seals filed an answer, and the
case proceeded to trial. After a bench trial, the court awarded
judgment against CKI and Seals, jointly and severally. The court
opined in its memorandum opinion as follows:
It is the opinion of this Court that Ms.
Seals and Creative Kitchens breached this
contract in providing noncomplying goods and
not doing proper measurements to assure their
fit. She also breached this contract when
she refused to communicate or remedy the
problems at and before the Bales terminated
the contract.
It is further my opinion that Ms. Seals and
Creative Kitchens had a much higher duty and
responsibility in this case than in a normal
arms-length transaction because of being paid
$75.00 per hour as a consultant. She
violated her fiduciary duty by not telling
the Bales about the flake-board construction,
refusing to communicate at a crucial juncture
of the contract, and not being on the job
site for proper measurements.
This is a case where Ms. Seals and Creative
Kitchens took gross advantage of unwary and
trusting young homeowners.
This is a case bordering upon fraud and
violation of the Tennessee Consumers
Protection Act for treble damages but the
Court elects to not pursue this punitive
course.
The court then entered judgment for the Bales in the amount of
their overpayment of $23,468.01, their attorney’s fees of
$8,290.49, the remainder of their escrow deposit, and costs.
6
7
II
In this non-jury case, our review is de novo upon the
record with a presumption of correctness as to the trial court’s
findings, unless the preponderance of the evidence is otherwise.
Rule 13(d), T.R.A.P.; Union Carbide Corp. v. Huddleston, 854
S.W.2d 87, 91 (Tenn. 1993); Carter v. Krueger, 916 S.W.2d 932,
935 (Tenn.App. 1995). The trial court’s conclusions of law come
to us free of any such presumption. Union Carbide Corp., 854
S.W.2d at 91.
We also note that the trial court is in the best
position to assess the credibility of the witnesses; therefore,
such determinations are entitled to great weight on appeal.
Massengale v. Massengale, 915 S.W.2d 818, 819 (Tenn.App. 1995);
Bowman v. Bowman, 836 S.W.2d 563, 566 (Tenn.App. 1991).
III
In their first issue, Seals and CKI argue that the
evidence preponderates against the trial court’s judgment. They
contend that Mr. Bale was not, as the trial court found, an
“unwary and trusting” homeowner, but instead was an experienced
negotiator of contracts. They also contend that the Bales failed
to give them adequate notice or an opportunity to cure the
defects in the cabinets.
We cannot agree with the appellants’ assertions.
Although the evidence indicates that Mr. Bale was knowledgeable
8
regarding contracts in general, it is nevertheless clear that he
and his wife placed their trust in Seals; as found by the trial
court, “[t]he Bales apparently had great confidence in Susan
Seals and totally relied upon her representations.” While it is
true that a breaching party must be given notice and a reasonable
opportunity to correct defects before the non-breaching party may
terminate a contract, Carter, 916 S.W.2d at 935-36, in this case,
Seals and CKI did have adequate notice of the “many, many
problems” with the cabinets, as well as an opportunity to cure
those problems. The evidence in this case supports the trial
court’s conclusion that Seals failed to communicate sufficiently
with the Bales in the period between the installation of the
defective cabinets and the Bales’ termination of the Agreement.
In short, the evidence supports the trial court’s
finding that Seals and CKI breached the Agreement. Specifically,
it is clear that the cabinets that were actually delivered were
not of comparable quality to those displayed by Seals in the CKI
showroom; that the cabinets did not fit properly in the Bales’
home; and that Seals did not communicate with the Bales in an
effort to correct the defects and fulfill her obligations under
the Agreement. The occurrence of each of these contingencies was
in direct contravention of the Agreement. It is also apparent
that the trial court accredited the testimony of Mr. and Mrs.
Bale. As noted earlier, determinations regarding the credibility
of witnesses are entitled to great weight on appeal. Bowman, 836
S.W.2d at 566.
Because we find that the evidence does not preponderate
9
against the trial court’s decision, Rule 13(d), T.R.A.P., we hold
that the appellants’ first issue is without merit.
IV
In their second issue, Seals and CKI insist that the
trial court erred in entering a judgment against Seals in her
individual capacity. They contend that Seals acted at all times
as the agent or representative of CKI, and that any damages that
occurred arose solely out of contracts or payments between the
Bales and CKI.
The appellants’ argument overlooks the fact that Seals
contracted with the Bales not only in her capacity as president
of CKI, but also in her individual capacity as a consultant and
fiduciary. The Bales originally retained Seals as a design
consultant at the rate of $75 an hour. More importantly, Seals
executed the Agreement with the Bales both individually and as a
representative of CKI. This is evidenced by the fact that she
signed the Agreement in two places. Her first signature clearly
was affixed on an individual basis, as it reflects no title or
other association with CKI. The second signature, on the other
hand, obviously was on behalf of the corporation. It appears
under the words “CREATIVE KITCHENS, INC.”; it is preceded by the
notation “By”; and it is followed by the title “President.”
Thus, Seals became a party to the Agreement in a dual capacity--
individually and on behalf of CKI.
A corporate officer may be held personally liable on a
10
contract that he or she has signed in both an individual and
representative capacity. See, e.g., Bill Walker & Assoc. v.
Parrish, 770 S.W.2d 764, 770 (Tenn.App. 1989). That is precisely
the situation in the instant case. Seals signed the Agreement in
her personal capacity, thereby incurring, among other things, the
obligation to ensure that high-quality cabinets were properly
installed and to communicate with the Bales to effectuate the
goals of the Agreement. In so doing, she assumed personal
liability for any breach of the Agreement. We therefore hold
that the trial court did not err in finding Seals and CKI jointly
and severally liable once it correctly determined that they had
breached the Agreement.
V
As a third issue for our consideration, the Bales raise
the question of whether the trial court erred in failing to award
them treble damages under the Tennessee Consumer Protection Act,
T.C.A. § 47-18-101, et seq. The Act provides, in pertinent part,
...the following unfair or deceptive acts or
practices affecting the conduct of any trade
or commerce are declared to be unlawful and
in violation of this part:
* * * *
Representing that goods or services are of a
particular standard, quality or grade, or
that goods are of a particular style or
model, if they are of another;
* * * *
Engaging in any other act or practice which
is deceptive to the consumer or to any other
person....
11
T.C.A. § 47-18-104(7),(27). The Act confers a private right of
action on an individual who has sustained damages as a result of
a violation of its provisions. Haverlah v. Memphis Aviation,
Inc., 674 S.W.2d 297, 305 (Tenn.App. 1984); Brungard v. Caprice
Records, Inc., 608 S.W.2d 585, 591 (Tenn.App. 1980). It provides
that
[i]f the court finds that the use or
employment of the unfair or deceptive act or
practice was a willful or knowing violation
of this part, the court may award three (3)
times the actual damages sustained and may
provide such other relief as it considers
necessary and proper.
T.C.A. § 47-18-109(a)(3). Thus, the Act vests the trial court
with wide discretion in awarding treble damages or other relief.
Id.; see also Smith v. Scott Lewis Chevrolet, Inc., 843 S.W.2d 9,
12 (Tenn.App. 1992).
The Bales contend that Seals and CKI are guilty of
violating T.C.A. § 47-18-104(7) or (27), quoted above. They
argue that the trial court’s findings of fact compel, as a matter
of law, the imposition of liability under the Act and the award
of treble damages. We disagree. Although the trial court noted
that Seals’ and CKI’s actions approached violations of the Act,
the Act does not require the court to award treble damages. The
statutory language is permissive rather than mandatory, as is
evidenced by its provision that the trial court “may”--as opposed
to “shall”-- award treble damages in appropriate circumstances.
T.C.A. § 47-18-109(a)(3).
12
Upon review of the record, we find no abuse of
discretion on the part of the trial judge; nor can we say that
the evidence preponderates against his decision to deny treble
damages to the Bales.
Accordingly, the judgment of the trial court is, in all
respects, affirmed. Costs on appeal are assessed against the
appellants and their surety. This case is remanded to the trial
court for enforcement of the trial court’s judgment and for
collection of costs assessed there, all pursuant to applicable
law.
__________________________
Charles D. Susano, Jr., J.
CONCUR:
_________________________
Houston M. Goddard, P.J.
_________________________
Herschel P. Franks, J.
13