James Collins v. Summers Hrdwe & Supply Co.

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
August 30, 2001 Session
JAMES A. COLLINS, ET AL. v. SUMMERS HARDWARE AND SUPPLY
COMPANY
Appeal from the Circuit Court for Washington County
No. 20085 Thomas J. Seeley, Jr., Judge
No. E2001-00578-COA-R3-CV Filed March 27, 2002
This is a suit by Plaintiffs James A. Collins and Gary Smith seeking damages from their
former employer, Summers Hardware and Supply Company, in connection with their employment.
The Plaintiffs contend that Summers Hardware made certain deductions from their pay which were
contrary to their employment contract. Summers Hardware asserts otherwise. A jury found this
issue in favor of the Plaintiffs and assessed damages, which the Trial Court, on motion of the
Plaintiffs, altered upward. Summers Hardware appeals questioning whether the statute of limitations
has run as to Mr. Collins’ suit and whether both parties were estopped to press the claim or had
waived their right to assert it. Summers Hardware also contends the Trial Court was in error in
increasing the jury award without giving them the option of receiving a new trial. We affirm.
Tenn.R.App.P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
Cause Remanded
HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which Herschel P. Franks, J.,
joined. D. MICHAEL SWINEY , J., not participating.
Rick J. Bearfield, Johnson City, Tennessee, for the Appellant Summers Hardware and Supply
Company
Mark M. Lawson, Bristol, Virginia, for the Appellees, James A. Collins and Gary Smith
OPINION
James A. Collins and Gary Smith, former employees-at-will of Summers Hardware and
Supply Company sue the Company for commissions they contend they were entitled to, which were
not paid. A jury returned a verdict finding that their insistence was correct and awarded Mr. Collins
$7500 and Mr. Smith $13,000.
The Trial Court overruled Summers Hardware’s motion to alter or amend or for a new trial,
except $387.94. contended to be owed Summers Hardware by Mr. Smith. The Plaintiffs likewise
filed a motion to alter or amend and the Trial Court increased Mr. Collins’ award to $15,087.21 and
Mr. Smith’s to $25,793.36.
Summers Hardware appeals, raising a number of issues which we will summarize and re-
state as follows:
1. The Trial Court should have found that the employment contract with Mr. Smith1 was divisible
or severable, resulting in the statute of limitations beginning to run upon his receiving his first pay
check, which was more than six years prior to October 20, 1999, the date this suit was filed.2
2. The Trial Court should have directed a verdict on Summers Hardware’s defense of estoppel and
should not have submitted that issue to the jury.
3. The jury was in error in finding the Plaintiffs had not waived their rights to assert their claims for
breach of contract.
4. The Trial Court erred in altering the judgment, which in effect was an additur without granting
Summers Hardware the right to refuse the additur and be granted a new trial.
Mr. Smith was employed by Summers Hardware from September 8, 1992, to June 25, 1999,
and Mr. Collins from March 14, 1994, to March 10, 1999.
It was the Plaintiffs’ theory that they were employed as at-will commission salesmen, and
the compensation agreed upon was a flat commission of 22.5 percent of the difference between the
sales price to customers and cost of the goods to Summers Hardware.
It was Summers Hardware’s theory that the agreement was that they should receive the 22.5
percent heretofore referenced, less deductions for medical insurance and Summers Hardware’s share
of Social Security.
Although the check stubs the Plaintiffs received had standard deductions, such as the
employees’ portion of Social Security provisions and withholding tax, it did not disclose any
deduction for the employer’s share of Social Security or for health insurance.
1
The statute of limitations as to Mr. Collins had not run.
2
The Trial Court limited Mr. Smith’s recovery to those damages suffered in the six years preceding
the filing of the com plaint.
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While it is true, as argued by Summers Hardware, that both Plaintiffs knew after the first few
pay checks that the amount received in their monthly payments was, as Mr. Smith put it, “a little bit
shy,” we do not believe this knowledge was sufficient to trigger the running of the statute of
limitations. We say this because there is proof in the record which the jury could have and, under
the verdict, most likely did believe that the officials of Summers Hardware deceived the Plaintiffs
by contending the deductions made were for “telephone costs, paper work, etc.” There is also proof
that Summers Hardware refused to show the Plaintiffs the commission reports, which disclosed the
deductions in question. These were kept in a vault and according to the pay master were not to be
shown to the employees absent authorization by Summers Hardware. There is also proof that when
inquiry was made one of the officers told them that “I will get back to you,” but he never did.
Finally and perhaps the most damning proof insofar as Summers Hardware’s defense is
concerned, the handbook given to both employees specifically provided the following:
EMPLOYEE BENEFITS
....
HEALTH INSURANCE
The company provides group health insurance which is underwritten by a national
carrier, Charter Benefits. After 90 days of employment you become eligible. At
that time you will be given the opportunity to accept the insurance coverage. The
insurance company provides a booklet explaining the various benefits, a copy of
which will be given to you when you join the program.
The company pays all the premiums of the employee. (Emphasis supplied.)
Summers Hardware also pleaded as to Mr. Smith that his claim was barred by the applicable
six-year statute of limitations and, in addition, that they both had waived their right to assert their
claim or estopped to do so.
At the close of the trial the jury returned a special verdict as follows:
VERDICT
Under the terms of the contract that the jury finds existed between the parties, the
jury reports as follows:
COLLINS
1. Did Collins by his conduct knowingly and intentionally waive any breach of
contract by Summers?
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Yes ______ No T
If no, proceed to Question 2
2. Did the parties agree that collins would receive as his gross pay 22.5% of
Summers’ gross profit reduced by Summers’ cost of social security and health
insurance?
Yes ______ No T
If you answered “Yes”, then answer Question 3.B. ONLY. If you answer
“No’, then proceed to Question Nos. 3A. and 3B).
3. Based upon your finding in Question NO. 2:
A. Summers owes Collins for unpaid commission at 22.5% $7500.00
B. Summers owes Collins for unpaid commission at 16.5% $ O
TOTAL OWED TO COLLINS $7500
SMITH
1. Did Smith by his conduct knowingly and intentionally waive any breach of
contract by Summers?
Yes ______ No T
If no, proceed to Question 2
2. Did the parties agree that Smith would receive as his gross pay 22.5% of
Summers’ gross profit reduced by Summers’ cost of social security and health
insurance?
Yes ______ No T
If you answered “Yes”, then Smith cannot recover. Proceed to the next
section. If you answer “No”, then proceed to Question No. 3.
3. Based upon your finding in Question No. 2:
Summers owes Smith for unpaid commission at 22.5% from October 20,
1993 (but not prior to that time) $13,000
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TOTAL OWED TO SMITH $13,000
SUMMERS
1. Does Smith owe Summers on Smith’s customer accommodation charge
account?
Yes No T
2. If yes, how much does Smith owe Summers: $ 0.00
/s/ (Not Legible)
FOREPERSON
DATE 11/10/00
Under Tennessee law it is clear that the statute of limitations begins running as to a contract
when the cause of action accrues. It is also clear that as to entire contracts, as distinguished from
severable contracts, a single cause of action arises upon a breach occurring. As to severable
contracts, however, breaches give rise to separate causes of action which may accrue at different
times. Both points are articulated in the case of Greene v. THGC, Inc., 915 S.W.2d 809 (Tenn. Ct.
App. 1995).
What is not clear is which contracts are entire and which are severable.
A number of cases have addressed the question, which we will now detail:
Barnes, et al. v. Black Diamond Coal Co., 47 S.W. 498 (Tenn. 1898)
In this case, which is the oldest one to which we have been cited, the plaintiff was seeking
rents claimed to be owed under a lease which was for one year at a rental of $30 per month. A
previous suit had been filed as to rent earlier due but not paid, which was pleaded by the defendant
as a bar to the present suit under the theory of res judicata. In addressing the question our Supreme
Court found the contract was severable and stated the following (at page 498):
It is next said the matter is res judicata. It appears that, previous to the
present suit, complainants brought an action for the rents of December, 1895, and
January and February, 1896, and recovered $90, or at the rate of $30 per month
for the three months. The rents previous to December, 1895, were paid. It is
insisted this is a bar to any further action for the breach of this contract. The
argument is that the contract is entire for the term, even although the rental is so
much per month, and, being an entire contract, there can be but one breach and
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one recovery therefor. If the contract is an entirety, and not divisible, it must
follow, under the authorities, that there can be but one breach and one recovery.
Tarbox v. Hartenstein, 4 Baxt. 78; Railroad Co. v. Staub, 7 Lea, 397. A single
cause of action cannot be split in order that separate suits may be brought for the
various parts of what really constitutes but one demand. 1 Enc. Pl. & Prac. pp.
148, 153. Taking judgment by mistake for a less sum than due will not justify the
plaintiff in recovering the residue in another action. Saddler v. Apple, 9 Humph.
342; 1 Enc. Pl. & Prac. 150, note; Thomason v. Rice, 1 Shannon, 70. As to when
a contract is entire, and when it is divisible, is a question upon which there is a
great confusion among the cases. It is said: "Whether a contract is entire or
separable into several independent contracts depends upon the intention of the
parties, to be ascertained from the language employed and the subject-matter of
the contract." 1 Enc. Pl. & Prac. pp. 150, 152, note 1; Pollak v. Association, 128
U. S. 446, 9 Sup. Ct. 119; Shinn v. Bodine, 100 Am. Dec. 560; Huyett & Smith
Mfg. Co. v. Chicago Edison Co. (Ill. Sup.) 59 Am. St. Rep. 278, 47 N. E. 384,
and cases there cited. And again: "Common sense must be applied to each case,
rather than any technical rules of construction." Leonard v. Dyer, 26 Conn. 172.
The general test rule to determine whether a contract is divisible or entire is stated
by Mr. Parsons thus: "If there are many parts of the contract, and some have been
broken, and others not yet, as if money was to be paid on the 1st of every month
for two years, and one year has expired, and nothing has been paid, the creditor
may bring his action for one or more of all the sums due, and recover accordingly,
and may, when the others fall due and are unpaid, sue for them." 3 Pars. Cont.
(5th Ed.) 188, 189. To the same effect, see Huyett & Smith Mfg. Co. v. Chicago
Edison Co. (Ill. Sup.) 59 Am. St. Rep., note on page 279 (s. c. 47 N. E. 384),
where the authorities are cited and fully collated.
The distinction between the two classes of contracts is plainly stated in
Coleman v. Hudson, 2 Sneed, 465, as follows: "In the former [entire contracts] the
consideration is entire on both sides. It does not, either by its terms or the implied
intention of the parties, contemplate or admit of apportionment upon a partial
failure on either side; and the complete fulfillment of the contract by either is
required as a condition precedent to the fulfillment of any part of the contract by
the other. A severable contract is a contract the consideration of which, by its
terms, is susceptible of division and apportionment. There is in such cases no
entirety of consideration on either side, constituting a condition of the agreement;
and neither party can claim more than an equivalent for the actual consideration
on his part. [Citing authorities.] There is another class of cases, noticed in some
of the books, of a mixed nature, partaking of the character both of entire and
severable contracts, and which may be considered as entire or severable,
according to the circumstances of the particular cases. Story, Cont. § 24." It was
held in that case that a contract to deliver, for a price named therein, from 100 to
150 head of beef cattle from the 1st of February to the last of July, in lots of 20 or
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more monthly, and all the hogs that are fed with the cattle, at the market price,
was divisible into several contracts as respects the remedy, for a breach of either
of which a separate action would lie. As illustrating the rule, it is held that, when
a promissory note is payable in installments, an action may be maintained for each
installment when it becomes due, and the statute of limitations begins to run from
that time. Bush v. Stowell, 10 Am. Rep. 694. See, also, Badger v. Titcomb, 26
Am. Dec. 611-613; Lorillard v. Clyde (N. Y. App.) 25 N. E. 292. See, also,
Coleman v. Hudson, 2 Sneed, 463. Installments of rent are subject to the same
rule as installments of money due, and an action may be brought as each
installment falls due. 1 Enc. Pl. & Prac. 155, note 3; Steinkuhl v. Hardin
(Jackson, 1875) 1 King's Dig. p. 561. The cases, it appears, however, are uniform
in holding that contracts for personal service must be treated as entire, and not
divisible; and hence there can be but one breach and one recovery upon default,
no matter if the wages are payable by installments or at stated periods. See the
cases collated in Huyett & Smith Mfg. Co. v. Chicago Edison Co. (Ill. Sup.) 59
Am. St. Rep. 290 (s. c. 47 N. E. 384). And in accord with this holding are our
cases of Hughes v. Cannon, 1 Sneed, 622, Tarbox v. Hartenstein, 4 Baxt. 78, and
Railroad Co. v. Staub, 7 Lea, 397. Whether this distinction arises out of the
nature of the contract, or is based on some other ground, it is well recognized and
enforced in cases where the holding would evidently be different if it were not a
contract for personal services; and, whether based on sound reasons or not, we
must recognize contracts for personal services as entireties. But, in regard to
rentals, there is, perhaps, no more common form of contract than a rental by the
year, payable monthly; and it cannot on any sound reason be held that if the tenant
breaches the contract, and abandons the premises, a suit for the first month's rent
would bar a recovery for subsequent months as they accrue.
We are of opinion, further, that the statute, Shannon's Code, § 4620, is
applicable to this case. It provides that "successive actions may be maintained on
the same contract or transaction whenever after the former action a new cause of
action arises therefrom." A new cause of action arises and becomes enforceable
with every successive installment. It is not meant that a complainant can
unnecessarily vex the defendant with successive small suits, for in such cases
injunction will lie to prevent multiplicity of suits; and accordingly it is a
well-established rule that, when an action is brought to collect installments, it
should include all then due, and that those then due constitute together but one
cause of action, and some of the cases go to the extent that a recovery in one suit
will bar a second action to recover other similar claims or installments that were
due when the first was brought. 1 Enc. Pl. & Prac. p. 155, notes 2 and 3, and
cases cited. We are of opinion that there is no error in the decree of the court of
chancery appeals, and it is affirmed, with costs.
Menihan Co. v. Hopkins, 164 S.W. 775 (Tenn. 1914)
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In this case an employee was hired for a salesman for a period of one year at a compensation
of $1500 to be paid monthly at the rate of $125. He contends he was wrongfully discharged “near
the middle of the contract year about June 1.”
The Supreme Court held that this contract should be treated as an entire and indivisible one,
that only one cause of action accrued, and that a prior action filed would be a bar under the doctrine
of res judicata as to any actions for salaries as to subsequent months. In so doing the Court used the
following language (at page 776):
It follows that, so far as regards the period following a wrongful discharge,
the contract being entire, only a single action based on the breach is maintainable.
Authorities, supra. And that the bringing of suit by the employé for services
during a part of such period before the year has expired (and damages thus
ascertained) becomes res adjudicata, barring a second action for services during
a subsequent portion of the period.
The fact that the employé has set forth in his pleading that his suit was for
"salary for the months" above indicated cannot avail to split the entire contract so
as to defeat the employer's right of set-off. The action in behalf of the employé
was one for damages incident to the breach of the contract as an entire one, and
not, after breach, for salary for any given month or months. In Olmstead v. Bach,
78 Md. 132, 27 Atl. 501, 22 L. R. A. 74, 44 Am. St. Rep. 273, the true rule is well
stated: "The employé had no option as to the remedies which he might pursue.
He was confined to an action for the recovery of damages which he had sustained
by a breach of the contract, because successive actions instituted for the recovery
of fractions of the same aggregate damages cannot be supported. His suit before
the magistrate was, whatever it purported to be, a suit for the breach of the
contract of hiring. *** There was but one dismissal and but one breach, and the
plaintiff could not split up his cause of action, recovering a part of his damages
in one suit and the remainder afterwards in other suits, for that single breach." A
right of action arose, not for unearned wages or salary as such, but for damages
for the breach of the contract.
We hold, therefore, that when the contract in question was broken, the
employés cause of action was not for salary, but one for damages growing out of
the breach of the contract, which was, as seen, an entire one.
In ascertaining these damages, they will be viewed as being aggregate for
the entire term, for the purposes of the complaining employé; and, by virtue of the
same principle, any right to deduction, by way of mitigation of damages, arising
at any time during the year in behalf of the employer, must be taken into
reckoning. Otherwise the employé as plaintiff would be permitted to elect to
segregate and include for remedial purposes that part of the year during or in
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respect of which no factor of mitigation arose, and exclude a subsequent portion
of the period in which such counterright did arise.
It is, of course, the rule that whatever the employé has, during the term, in
fact received as compensation under a contract with another employer, after
dismissal, must be deducted. Children of Israel v. Peres, 2 Cold. 620; Allen v.
Maronne, 93 Tenn. 161, 23 S. W. 113; 1 Labatt, M. & S. (2d Ed.)§ 390.
Stone v. Halsell, 648 S.W.2d 949 (Tenn. Ct. App. 1982)
In this case a circuit court clerk was suing to recover unpaid salaries. Although the
determination of the case turned on statutes relative to clerks’ salaries, the court did find that the
clerk was entitled to recover for unpaid salary for a period of six years preceding the filing of the
suit.
Greene v. THGC, Inc., 915 S.W.2d 809 (Tenn. Ct. App. 1995)
This is a suit wherein the plaintiff had been granted a complimentary lifetime membership
as a result of an assignment of beneficial interest in real estate to THGC’s predecessor in title.
The determinative question in the case is when the statute of limitations began to run. This
Court held that the contract was entire and the statute began to run upon the plaintiff being advised
that his complimentary membership would not be honored. In reaching this conclusion the Court
stated the following (at page 811):
Tennessee Code Annotated section 28-3-109(a)(3) (1980) provides that the
statute will begin to run when "the cause of action accrued." The trial court held
that the cause of action did not accrue until plaintiff incurred damages. We are
of the opinion that the trial court was in error since the construction of the contract
shows that plaintiff did not enjoy a separate cause of action upon each dues
payment, but rather he had a single cause of action which accrued upon
defendant's repudiation of the contract in 1985.
"Where a contract is severable or divisible, breaches of its severable parts
will give rise to separate causes of action accruing at different times, ..." Brockett
v. Pipkin, 25 Tenn.App. 1, 8, 149 S.W.2d 478, 482 (1941) (quoting 37 C.J.
Limitations of Actions § 216 (1925)). Under these circumstances, the statute of
limitation will begin to run at the time of each breach. Id. On the other hand, "if
a continuing contract is entire, an action can be maintained on it only when a
breach occurs or the contract is in some way terminated, and the statute begins to
run from that time only." 54 C.J.S. Limitations of Actions, § 154 (1987).
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Under Tennessee law there is no precise definition of when a contract is
entire or when it is severable. James Cable Partners, L.P. v. City of Jamestown,
818 S.W.2d 338, 344 (Tenn.App.1991), cert. denied, 502 U.S. 1032, 112 S.Ct.
872, 116 L.Ed.2d 777 (1992). A contract is severable "where each part is so
independent of each other as to form a separate contract." Id. A contract is entire
when the "promises of both parties are interdependent and relate to the same
subject matter." Id.Although the quotations for the opinions above set out are to some degree contradictory, we
are persuaded that the contract with the Plaintiffs, which did not provide for a specific amount to be
paid, as was the case in Menihan, was not entire, but severable. We accordingly affirm the Trial
Court’s determination to that effect.
As to the issue of estoppel, the burden of proof is upon the party asserting such, Edwards v.
Central Motor Company, 277 S.W.2d 417 (Tenn. 1955), and counsel for the Plaintiffs in their trial
brief correctly states the elements thereof:
“In order to constitute an equitable estoppel, estoppel by conduct, or
estoppel in pais there must exist a false representation or concealment of
material facts; it must have been made with knowledge, actual or
constructive, of the facts; the party to whom it was made must have been
without knowledge or the means of knowledge of the real facts; it must
have been made with the intention that it should be acted on; and the party
to whom it was made must have relied on or acted on it to his prejudice.”
[Ryan v. Lumbermen’s Mutual Cas. Co., 485 S.W.2d 548, 550 (Tenn.1972)
(citing 31 C.J.S. Estoppel § 67 at 402)].
We agree with the Trial Judge that under the facts developed the Plaintiffs were not entitled
to a directed verdict as to this issue. Moreover, it does not appear this issue was submitted to the
jury as the special verdict form makes no mention thereof.
Regarding waiver, counsel for Summers Hardware in its trial brief also correctly states this
doctrine:
“A waiver is an intentional relinquishment of a known right and is a
doctrine of very broad and general application. It concedes a right, but
assumes a voluntary relinquishment of it. Our courts have held that there
must be clear, unequivocal and decisive acts of the party of an act which
shows determination not to have the benefit intended in order to constitute
a waiver.”
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(Gitter v. Tennessee Farmers Mut. Ins. Co., 450 S.W.2d 780, 784 (Tenn. Ct. App.
1969)).
Certainly under the proof in this case, given the fact that representatives of Summers
Hardware misled the Plaintiffs relative to the deduction from their checks and concealed from them
the true facts, there is material evidence to support the jury’s verdict relative to this issue.
With regard to the Court increasing the judgment, it appears that after the jury verdict was
rendered in favor of the Plaintiffs, a simple mathematical computation would determine the amount
of damages. Indeed, in the case of Spence v. Allstate Ins. Co., 883 S.W.2d 586 (Tenn. 1994), our
Supreme Court addressed the precise question where the amount to which the plaintiff was entitled
was uncontested. In approving the trial court’s altering and amending the judgment to that figure,
the Supreme Court stated the following (at page 594):
The next issue for our determination is whether the Court of Appeals erred
in affirming the trial court's grant of Allstate's motion for "additur." This ruling
increased the judgment against Pamela Spence from $4,990 to $88,777. (FN3)
Pamela Spence argues that the trial court erred because it failed to obtain
her consent before ordering the additur. This, she says, violated her right to jury
trial as guaranteed by the Seventh Amendment to the United States Constitution
and Article I, § 6 of the Tennessee Constitution.
Pamela Spence is correct that the federal and state constitutions require the
consent of the party against whom the additur is to be entered. Dimick v. Schiedt,
293 U.S. 474, 486, 55 S.Ct. 296, 301, 79 L.Ed. 603 (1935); McCall v. Waer, 487
S.W.2d 308, 310 (Tenn.1972); Kaiser v. Cannon, 529 S.W.2d 235(Tenn.App.1975). The rationale for requiring such consent is that when the trial
court grants a motion for an additur, it is essentially disagreeing with the jury's
determination of damages--which is a question of fact. Because the trial court is
acting in its capacity as "thirteenth juror," the right to jury trial clauses of the
federal and state constitutions--which require that the jury be allowed to determine
all disputed issues of fact, Finks v. Gillum, 38 Tenn.App. 304, 273 S.W.2d 722(1954); Morgan v. Tennessee Central Ry., 31 Tenn.App. 409, 216 S.W.2d 32(1948)--mandate that the trial court obtain the consent of the party against whom
the additur is to be entered. And if that party does not accept the additur, the trial
court must order a new trial. Tenn. Code Ann. § 20-10-101(a)(2).
That rationale does not apply to this case because Allstate's motion to
increase the judgment, although denominated as a motion for "additur," was in
fact a motion to alter or amend the judgment pursuant to Rule 59.04,
Tenn.R.Civ.P. This is so because Allstate's damages on its indemnity claim
against Pamela Spence were undisputed--the only issue of fact for the jury to
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decide on the indemnity claim was whether Pamela Spence was responsible for
the fire. If the jury did decide that she was responsible for the fire, it was required
to award Allstate the total amount it had expended on the claim.
....
Because there was no factual issue concerning damages, the trial court was
not acting as "thirteenth juror" in increasing the judgment to the amount that
Allstate had expended due to Pamela Spence's acts. It is, moreover, well settled
that a trial court may modify a judgment when the damages awarded by the jury
conflict with the undisputed facts concerning damages. See Martin v. Prier Brass
Mfg. Co., 710 S.W.2d 466 (Mo.App.1986) (judgment against insurer modified
when it exceeded the applicable limits of the insurance policy); Dixie Ins. Co. v.
Federick, 449 So.2d 972 (Fla.App.1984) (same). Therefore, the holding of the
Court of Appeals on this issue is affirmed. (FN4)3
We also observe as to this point that had the trial been bifurcated and the jury first asked to
determine the terms of the contracts of employment and reported as it did in favor of the Plaintiffs,
the Trial Court would have been justified in directing a verdict as to the amount of damages
sustained.
For the foregoing reasons the judgment of the Trial Court is affirmed and the cause remanded
for collection of the judgments and costs below. Costs of appeal are adjudged against Summers
Hardware and Supply Company and its surety.
_________________________________________
HOUSTON M. GODDARD, PRESIDING JUDGE
3
The footnotes in the quoted material have been omitted.
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