Samples v. Maxson-Betts Co.

MORRIS, Judge.

By. assignment of error No. 3 defendant raises the question whether the court erred in granting the motion of the plaintiff for a directed verdict, G.S. 1A-1, Rule 50(a), as to defendant’s counterclaim. In its counterclaim, the defendant alleged that prior to 1 December 1970, the plaintiff was a full-time employee of the defendant and by the terms of his employment was to devote his full time and energies to the defendant’s business; that plaintiff caused defendant additional expenses, on certain “jobs” by taking secret “kickbacks”; that the “kickbacks” amounted to some $2,950, plus other indeterminate amounts, received during 1969 and 1970. The defendant prayed that it have and recover of the plaintiff the full amount of any funds so obtained.

The evidence elicited at the trial of the cause on this issue tended to show that during 1969 and 1970, the plaintiff received two payments totaling $2,940 from the B and H Steel Erecting Company which were not disclosed or reported to the defendant. As to the first payment of $940, the evidence concerning its origin was that the plaintiff earned the money for managing the installation of certain equipment at Jacksonville, North Carolina, on a weekend and that plaintiff used some of the money to pay expenses for the men and the equipment that were hired by him for the job.

The plaintiff testified that the equipment installation was performed.under his direction as a part of “the Helicopter Group Training job,” and that Maxson-Betts Company was a subcontractor on that job. Plaintiff testified that “the Helicopter Group Training job, I did on the weekend at my own expense, to help the -erector out because he didn’t have any men to send down there, and the material that was on the job had to be erected that weekend. So, I took men and equipment, went to the. job and worked the entire weekend and installed the equipment for him. He in turn paid me the $940 that was in the job for erection, and I in turn paid the men and all.their expenses for the weekend.” The plaintiff further testified that he received a second $2,000 payment as a result of work performed by him in construction of a conveyor system for the B and H Steel Erecting Company on “the Allied Chemical job in Irmo, S. C.,” on which job Maxson-Betts Company was a. subcontractor. Plaintiff testified that- “[w]e could not find a manufacturer who could make this particular item. So I worked .with Mr. Tom Brown, of B and H Steel Company, and Mr. Larry Lupo, of the Coleman Company, and we spent many hours engineering this system and building it. Now, this money [the $2000] was in payment for my services doing this. Maxson-Betts Company paid B, and H Steel Company for the erection of an overhead crane system and the conveyor systems. They also paid B and H Steel Company for the manufacture of the conveyors and the installation of the conveyors. ...”

The general rule in regard to secret profits garnered by employees, not disclosed to their employers, in breach of their fiduciary relationship with their employer, is that the earnings of the employee in the course of, or in connection with, his services belong to the employer, so that the employer in a proper action may recover the profits of the agent’s transaction and the employee is accountable therefor. Cotton Mills v. Manufacturing Co., 221 N.C. 500, 20 S.E. 2d 818 (1942); 56 C.J.S., Master and Servant, § 71; 53 Am. Jur. 2d, Master and Servant, § 101; Lee, North Carolina Law of Agency and Partnership, §§ 31, 37; Annot., 102 A.L.R. 1115; Restatement of Agency 2d, § 388.

The evidence in this case viewed in the light most favorable to defendant and giving defendant the benefit of every reasonable inference therefrom, tends to show that plaintiff, as a salesman for defendant, procured two contracts for defendant for which he received a commission, but that, without defendant’s knowledge, plaintiff assisted in doing part of the work on the two jobs subcontracted to the B and H Steel Company for which plaintiff received payment from the B and H Steel Company, which payment was included in the cost of the contract to defendant. Viewed in this light, plaintiff’s position and interests were adverse to those of defendant, plaintiff’s employer: plaintiff had an interest in contracting with the B and H Steel Erecting Company in order to recover additional compensation for services they would permit him to perform, whereas defendant’s interests were in contracting for the lowest possible cost. We are of the opinion that the evidence on this issue was sufficient to present questions for the jury whether the earnings of the plaintiff were undisclosed and gained in the course of, or in connection with, the services of the plaintiff which were owed to the defendant, and whether those earnings were achieved as a result of the plaintiff’s breach of his fiduciary relationship with the defendant. Therefore, it was error for the trial court to direct a verdict, dismissing the counterclaim of the defendant.

By assignments of error Nos. 1 and 2, defendant raises the question whether the trial court erred in denying the motions of the defendant for a directed verdict and for judgment notwithstanding the verdict, G.S. 1A-1, Rule 50(a) and (b). We are of the opinion that the evidence was sufficient to carry-issues to the jury regarding the existence of a contract between plaintiff and defendant, whether the Piedmont Courts job was covered by that contract, and the amount of recovery by the plaintiff under the contract.

By assignments of error Nos. 4 and 5 defendant raises the question whether the trial judge committed error in the charge to the jury. Assignment of error No. 4 is to- the court’s summation of the contentions of the parties in regard to the evidence pertinent to the second issue submitted to the jury. We are of the opinion that the question raised by assignment of error No. 4 is without merit, and that assignment of error is overruled. Assignment of error No. 5 is to the portion of the court’s charge on quantum meruit recovery. Defendant argues that there was insufficient evidence to raise any issue as to quantum meruit recovery and that, therefore, the charge of the court on that issue was erroneous. However, assuming arguendo that there was insufficient evidence to raise an issue as to quantum meruit recovery, which we do not concede, even so the charge of the court as to that issue would not amount to prejudicial error, since the jury found the facts to be that there was an express contract and gave recovery to the plaintiff, not on a quantum meruit basis, but on the basis of the difference between the amount due to the plaintiff under the contract and the amount paid to the plaintiff at the time of trial.

The result of the foregoing is this: As to the directed verdict on defendant’s counterclaim, reversed; as to the judgment in favor of the plaintiff, affirmed.

Affirmed in part and reversed in part.

Judges Britt and Vaughn concur.