Marine Ecology Systems, Inc. v. Spooners Creek Yacht Harbor, Inc.

253 S.E.2d 613 (1979) 40 N.C. App. 726

MARINE ECOLOGY SYSTEMS, INC.
v.
SPOONERS CREEK YACHT HARBOR, INC.

No. 783DC529.

Court of Appeals of North Carolina.

April 17, 1979.

Bennett, McConkey & Thompson by Thomas S. Bennett, Morehead City, for plaintiff.

Jones & Wooten, Everette L. Wooten, Jr., Kinston, for defendant.

ROBERT M. MARTIN, Judge.

Defendant contends the court erred in finding that the value of the equipment on the date it was repossessed was $800. He argues that plaintiff, having filed an affidavit in the claim and delivery action stating that the property was worth $2,400, was estopped to change his position with respect to a material matter during the course of litigation. In support of this proposition, defendant cites Roberts v. Grogan, 222 N.C. 30, 21 S.E.2d 829 (1942); Ingram v. Power Company, 181 N.C. 359, 107 S.E. 209 (1921). We find these cases distinguishable from the instant case. A plaintiff seeking to gain possession of property which he contends is rightfully his must, as a part of the claim and delivery proceeding, provide an undertaking for twice the value of the goods or property to be repossessed, this value being established by affidavit made upon information and belief. N.C.Gen.Stats. § 1-475. The required undertaking is for the protection of defendants, so that a fund might be established from which recovery could be had were it shown that the plaintiff was not lawfully entitled to the property or that the property was damaged or diminished in value through plaintiff's fault while plaintiff held possession of it. See 66 Am.Jur.2d Replevin, § 64 (1973). Custom and prudence have established that plaintiffs will ordinarily assign to the property to be repossessed a value which represents the maximum amount in controversy over such property, where that figure is likely to be higher than the actual value of the property. This provides the maximum protection for the party from whom the property has been taken by the claim and delivery proceeding and is consistent with our notions of due process. However, the affidavit and undertaking in a claim and delivery action, intended as they are for the defendant's protection, are not made as conclusive declarations of value and, accordingly, defendant is not entitled to take those valuations from the proceeding before the clerk (which was ancillary to the action on the lease in the instant case) and seek, by collateral estoppel, to prevent plaintiff from proving at trial the actual (and here, lower) value of the property, using market value or other applicable standards of valuation. The North Carolina claim and delivery proceeding is essentially a statutory form of the common law action of replevin. We turn, therefore, to authorities dealing with replevin for support of our conclusions. There is a split of authority with respect to whether the valuation of property made in an affidavit and undertaking will be binding upon the party making it. The better rule, and the one we have adopted above, is that the valuation made in an affidavit or undertaking may be some evidence of value but is not conclusive. This principle was well stated by the court in Maguire v. Pan-American Amusement Co., 205 Mass 64, 91 N.E. 135 (1910):

If a plaintiff in replevin chooses to make a statement of the value of the property in his writ or in his bond, undoubtedly it should be regarded as an admission by him, and should afford evidence of that value against him and those who, like his sureties, are in privity with him. But it is against all the analogies of the law to treat the mere admission of a party, not essential, as we have seen that this is not essential, to the institution or the prosecution of his proceedings, and not acted upon or intended to be in any way acted upon by the opposite party, as an estoppel. Athol Savings Bank v. Bennett, 203 Mass. 480, 485, 89 N.E. 632. The averment may have been made without seeing the property or knowing anything of the condition into which it has been put by the defendant in replevin. It is customary in our practice to prepare the bond in advance of the service of the writ and before an appraisal of the property has been made under R.L. c. 190, §§ 3 and 9. If this is done, the plaintiff will naturally make the penalty of the bond large enough to cover whatever appraisal may in the future be made. Under such circumstances the fact that the bond is required to be in double the value of the property scarcely justifies the inference that the plaintiff and his sureties are estopped to deny that the value of the property is at least half of the penalty of the bond, especially since we have decided that no harm is done to any party by making that penalty needlessly large. Clap v. Guild, 8 Mass. 153.

Id. at 71-72, 91 N.E. 137-138. Accord, Peters v. Brown, 245 Ill.App. 570 (1927). But see, contra, Capitol Lumber Corp. v. Learned, 36 Or. 544, 59 P. 454 (1899). Also see generally 66 Am.Jur.2d Replevin § 150 (1973). We find that the evidence before the court was sufficient to support the judge's findings that the equipment when returned was worth only $800.00. Facts found by the court during a hearing without a jury will not be disturbed if supported by competent evidence. Accordingly, defendant's assignments of error are overruled.

Defendant contends that the trial court erred in using as its measure of damages the rent for the entire remaining term of the lease, less the fair market value of the property as of the time it was repossessed since the facts showed that the plaintiff did not attempt to resell or re-lease the property and thus did not attempt to mitigate his damages as he was obligated to do.

In Tillinghast v. Cotton Mills, 143 N.C. 268, 55 S.E. 621 (1906), the Court said: "It is an established principle that when there has been a breach of contract definite and entire, the injured party must do what fair and reasonable business prudence requires to save himself and reduce the damage, or the damage which arises from his own neglect will be considered too remote for recovery." This principle has been reaffirmed by numerous decisions of the Court. The president of plaintiff corporation testified that he attempted to sell the equipment to an outfit in Ohio, but was unsuccessful. He also stated that the equipment was an outdated model by the time it was repossessed and that he based his opinion of value on the fact that they tried to get $800 for the equipment but were unable to do so. It is only necessary that the injured party acts with such care and diligence as a man of ordinary prudence would under the circumstances, and his efforts to minimize damages are determined by the rules of common sense, good faith, and fair dealing. 22 Am.Jur.2d § 32. We find that plaintiff took the necessary steps to minimize the loss. Defendant's assignments of error are overruled.

Finally, defendant contends the court erred in allowing recovery of attorney fees. He argues that the lease contract was not an evidence of indebtedness and that attorney fees could not be allowed under N.C.Gen.Stats. § 6-21.1, and that only agreements intended as security are covered under this statute. Defendant cites Yeargin Construction Co. v. Futren Development Corp., 29 N.C.App. 731, 225 S.E.2d 623 (1976). We agree with defendant. Plaintiff is not, under the statute, entitled to attorney's fees and that part of the judgment allowing attorney's fees is reversed.

Affirmed in part, reversed in part.

MITCHELL and WEBB, JJ., concur.