Process Components, Inc. v. Baltimore Aircoil Co.

366 S.E.2d 907 (1988)

PROCESS COMPONENTS, INC.
v.
BALTIMORE AIRCOIL CO., INC.

No. 8726SC1058.

Court of Appeals of North Carolina.

April 19, 1988.

William D. Acton, Jr. and Frank B. Aycock, III, Charlotte, for plaintiff.

Moore & Van Allen by Charles E. Johnson, Holly J. Hickman and Robert J. Greene, Jr., Charlotte, for defendant.

HEDRICK, Chief Judge.

Liberally construing defendant's brief, it seems defendant contends the trial court erred in denying its motion for directed verdict because plaintiff had not proved damages. In order to recover damages for lost profits, an injured plaintiff must prove its losses with reasonable certainty. Olivetti Corp. v. Ames Business Systems, Inc., 319 N.C. 534, 356 S.E.2d 578 (1987). Where the action is in tort, as in this case, damages must be the natural and probable result of the tortfeasor's misconduct. Id. The measure of damages under G.S. 75-1.1 should also reflect the fact that the cause of action is broader than traditional common law actions. Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981); Bernard v. Central Carolina Truck Sales, 68 N.C. App. 228, 314 S.E.2d 582, disc. rev. denied, 311 N.C. 751, 321 S.E.2d 126 (1984). Here, plaintiff proved some damage. The amount of damages was for the jury, under proper instructions from the court, to decide. We hold the trial court did not err in denying defendant's motion for a directed verdict.

Defendant next argues the trial court erred by admitting evidence of another company's profits. The record indicates no evidence of Hewitt's past profits was admitted, but instead evidence of gross sales was admitted. Even so, the connection between Hewitt's past sales and PROCOM's lost profits is especially strong since defendant used these figures to induce PROCOM into entering into a distributorship agreement. Hewitt's sales were made in the same geographic area and to the same customers as PROCOM's sales would have been. For these reasons, the evidence of Hewitt's prior sales was relevant and therefore admissible. It was for the jury to decide how much weight to give such evidence.

Defendant further assigns error to denial of its motion for a directed verdict with respect to plaintiff's claim for unfair or deceptive trade practices. G.S. 75-1.1(a) provides that "[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful." There is no precise definition of unfair or deceptive acts, but whether a particular act is unfair or deceptive depends on the facts surrounding the transaction and the impact on the marketplace. Concrete Service Corp. v. Investors Group, Inc., 79 N.C. App. 678, 340 S.E.2d 755, cert. denied. 317 N.C. 333, 346 S.E.2d 137 (1986).

In this case issues were submitted to the jury, and they were answered as follows:

4. Did the Defendant do any one or more of the following:

(a) Falsely represent to the Plaintiff that the Gene Hewitt Company was terminated as Industrial Market Representative for PACO pumps in North and South Carolina?

ANSWER: Yes

(b) Falsely represent to the Plaintiff that the Plaintiff was the exclusive Industrial Distributor for PACO pumps in North and South Carolina?

ANSWER: Yes

(c) Falsely represent to the Plaintiff that the Plaintiff would receive all of the parts business for the Industrial Market in North and South Carolina?

ANSWER: Yes

5. Was the Defendant's conduct in commerce or did it affect commerce?

ANSWER: Yes

6. Was the Plaintiff injured as a proximate result of the Defendant's conduct?

ANSWER: Yes

7. By what amount, if any, has Plaintiff been injured?

ANSWER: 210,000

The trial court found that these answers "establish as a matter of law that defendant injured plaintiff by unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce...." Defendant argues there is insufficient evidence that it made any false representations as found by the jury in issues 4(a), (b) and (c) and insufficient evidence that plaintiff was proximately damaged, and that these issues should not have been submitted to the jury. We disagree.

Wayne Gravitte testified at trial that Travis Glover was "asking for someone who would be their only industrial distributor that would cover that market in the two Carolinas." He also testified that he and Glover discussed PROCOM being the only distributor of pumps in the industrial market and that he indicated PROCOM was not interested in a distributorship unless it had the total market. Gravitte further testified Glover never indicated Hewitt would still be selling in the industrial market and that when asked whether PROCOM was the only industrial distributor in the Carolinas, Glover answered "yes." James Leshock also testified that his understanding with Glover was that "the Gene Hewitt Company would handle the building trades part of the market as a representative, and that PROCOM would handle, as a distributor, the industrial market." Additional evidence at trial indicates Hewitt was never out of the industrial market as defendant had represented. This evidence is sufficient to raise an inference which would support the jury's answers to issues 4(a) and (b). Gravitte also testified as to discussions about the parts business and this testimony is sufficient to support issue 4(c). Sufficient evidence was also presented to show plaintiff was proximately damaged. This argument has no merit.

Defendant also contends, based on Assignment of Error No. 5, that the trial court erred in concluding the acts of defendant injured plaintiff in violation of G.S. 75-1.1 because there is insufficient evidence of unfair or deceptive acts or practices and because the issues answered by the jury do not constitute unfair or deceptive acts or practices. G.S. 75-1.1 provides that "unfair or deceptive acts or practices in or affecting commerce" are unlawful. Although there is no precise definition of unfair or deceptive acts or practices, Concrete Service Corp. v. Investors Group, Inc., 79 N.C.App. 678, 340 S.E.2d 755, cert. denied, 317 N.C. 333, 346 S.E.2d 137 (1986), a practice is generally unfair when it "offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious...." Johnson v. Insurance Co., 300 N.C. 247, 263, 266 S.E.2d 610, 621 (1980). The evidence of defendant's misrepresentations clearly supports the court's conclusion that defendant's unfair or deceptive acts or practices caused injury to plaintiff.

Finally, defendant assigns error to denial of its motion for directed verdict with respect to plaintiff's claim for damages due to breach of contract. Defendant argues the evidence is not sufficient to show it entered into and breached an exclusive contract with plaintiff. We disagree. As we have stated, testimony indicates defendant represented to plaintiff that plaintiff would have an exclusive distributorship. Evidence further clearly establishes that plaintiff and defendant did enter into a contract and that defendant breached it.

For the reasons set out above, we find no prejudicial error in defendant's appeal.

Plaintiff assigns error to the trial court's directing a verdict for defendant with respect to plaintiff's claim for fraud. Our Supreme Court, in Britt v. Britt, 320 N.C. 573, 579, 359 S.E.2d 467, 471 (1987), set out the essential elements of fraud:

... (1) the defendant's false representation of a past or existing fact, (2) defendant's knowledge that the representation was false when made or it was made recklessly without any knowledge of its truth and as a positive assertion, (3) defendant made the false representation with the intent it be relied on by the plaintiff, and (4) the plaintiff was injured by reasonably relying on the false representation.

While there is evidence defendant made false representations to plaintiff, there is no evidence defendant made them with intent they be relied on by plaintiff, and the trial court did not err with respect to defendant's motion for directed verdict. Even if there were evidence to support the fraud claim, plaintiff could not have a recovery on both a fraud claim and a claim under G.S. 75-1.1 since they would arise from the same course of conduct. Borders v. Newton, 68 N.C.App. 768, 315 S.E.2d 731 (1984); Wilder v. Hodges, 80 N.C.App. 333, 342 S.E.2d 57 (1986). Plaintiff's argument has no merit.

Plaintiff next contends the trial court erred by allowing defendant's motion for a directed verdict as to individual plaintiffs' claims. Because the trial court found there was lack of evidence to support a fraud claim, there was no error in not submitting an issue concerning individual plaintiffs' claims of fraud. Since the trial court did not submit an issue of fraud with respect to individual plaintiffs there could also be no conceivable prejudice by the court not allowing evidence of damages by individual plaintiffs.

As to other claims, the individual plaintiffs lacked any standing. Generally, shareholders cannot maintain individual actions against third persons for wrongs or injuries to the corporation which result in depreciation or destruction of the value of their stock. Howell v. Fisher, 49 N.C.App. 488, 272 S.E.2d 19 (1980), disc. rev. denied, 302 N.C. 218, 277 S.E.2d 69 (1981). The only exception is where the injury to individual stockholders results from a special duty owed to the stockholder by the wrongdoer and having an origin independent of plaintiff's status as stockholder. Id. This exception would apply if the individual plaintiffs were induced to buy stock because of defendant's representations. There is no evidence of this in the record. All of the claims properly belong to the corporate plaintiff PROCOM, and the argument has no merit.

Plaintiff, in Assignment of Error No. 4, argues the trial court erred in allowing defendant's motion for directed verdict on the punitive damages claim. With respect to the claims of individual plaintiffs, they had no claim at all and therefore there could be no claim for punitive damages. As for the corporate plaintiff, since there was no evidence of fraud there could be no punitive damages awarded. Generally, punitive damages are not awarded for a violation of G.S. 75-1.1. Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 (1975). In this case, treble damages were awarded for a violation of G.S. 75-1.1, and for that reason punitive damages for fraud could not be awarded even if fraud could be proven since there cannot be a recovery on both claims arising from the same course of conduct. Wilder v. Hodges, 80 N.C.App. 333, 342 S.E.2d 57 (1986). In plaintiff's appeal we find no error.

The result is on defendant's appeal, no error; on plaintiff's appeal, no error.

EAGLES and COZORT, JJ., concur.