Mountain Wood Products, LLC v. Autumn Creek Firewood, LLC

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
Submitted on Briefs January 8, 2014
MOUNTAIN WOOD PRODUCTS, LLC
v.
AUTUMN CREEK FIREWOOD, LLC
Appeal from the Chancery Court of Bledsoe County
No. 3163 Jeffrey F. Stewart, Chancellor
No. E2013-01577-COA-R3-CV-FILED-MAY 30, 2014
This appeal involves a contract dispute. The appellant distributor challenges the damages
awarded to the appellee supplier under a supply contract for bagged firewood. Additionally,
the supplier challenges the trial court’s failure to award damages for lost profits and tortious
interference with prospective business. Discerning no error, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is
Affirmed.
H OLLY M. K IRBY, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.
W.S., and J. S TEVEN S TAFFORD, J., joined.
Samuel J. Gowin, Chattanooga, Tennessee, and Clark E. Gulley, Colbert, Georgia, for
Plaintiff/Appellant Mountain Wood Products, LLC
W.I. Howell Acuff, Cookeville, Tennessee, for Defendant/Appellee Autumn Creek
Firewood, LLC
MEMORANDUM OPINION 1
F ACTS AND P ROCEEDINGS B ELOW
The facts in this case are generally undisputed. Plaintiff/Appellant Mountain Wood
Products, LLC (“Mountain Wood”) is a limited liability company engaged in the business
of producing and distributing bagged firewood. Mountain Wood’s firewood was sold at big
box retailers such as Publix, Kroger, Home Depot, and Winn-Dixie for over 13 years.
Defendant/Appellee Autumn Creek Firewood, LLC (“Autumn Creek”) is a limited liability
corporation formed in February 2010. In June 2010, Autumn Creek was interested in getting
into the business of providing bagged firewood, so Autumn Creek approached Mountain
Wood for the purpose of establishing a business relationship. Pursuant to Autumn Creek’s
initial contact, on August 10, 2010, the owner of Autumn Creek, Mr. Josh Crace, and the
principal owner of Mountain Wood, Mr. David Creely, executed a supply contract (“Supply
Contract”) for Autumn Creek to supply firewood to Mountain Wood. The 17-page Supply
Contract was prepared by Mountain Wood without the assistance of an attorney.
The Supply Contract stated that the “Term of Agreement” for the contract “shall be for the
2010-2011 Retail Firewood Season beginning on the date stated above until midnight on the
31st day of March, 2011.” Under the Supply Contract, Mountain Wood “agree[d] to
purchase from [Autumn Creek] 150,000 .75 cubic feet bags of firewood,” at $2.50 per bag,
less a 7% commission and less $0.23 for the cost of the bag, for a total of $2.10 per bag. The
Supply Contract did not expressly address whether Autumn Creek was required to use
Mountain Wood’s bags. The Supply Contract called for Mountain Wood to pay 30 days after
receiving an invoice from Autumn Creek. The only performance requirements listed in the
Supply Contract described how the bags and pallets were to be sized and packed for delivery.
The Supply Contract also contained the following provision on damages:
11. Damages: In the event of any disruption or delay in the bagging of
firewood ordered by [Mountain Wood] for Designated Retailer or for any
[Mountain Wood] location resulting in delayed or rejected orders, [Autumn
1
Rule 10. Memorandum Opinion
This Court, with the concurrence of all judges participating in the case, may affirm, reverse
or modify the actions of the trial court by memorandum opinion when a formal opinion
would have no precedential value. When a case is decided by memorandum opinion it shall
be designated “MEMORANDUM OPINION”, shall not be published, and shall not be cited
or relied on for any reason in any unrelated case.
Tenn. Ct. App. R. 10.
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Creek] shall be liable for all costs resulting from such delay or disruption. If
delay, disruption, or damage occurs during transit . . . [Autumn Creek] will not
be held liable for costs incurred. In the event of breach of this Supply
Contract, [Autumn Creek] may be held liable only for the reasonable increased
cost of bagged firewood required to cover the contractual volume until the
ending date of this Supply Contract.
The Supply Contract did not include a delivery schedule. However, the record indicates that
the parties apparently agreed orally that Autumn Creek’s firewood shipments to Mountain
Wood would begin in early September 2010. The record also indicates that both parties
expected relatively steady demand for product throughout the firewood season.
After the parties entered into the Supply Contract, Mountain Wood experienced some
internal confusion and staffing issues. As a result, Mountain Wood did not place its first
firewood order with Autumn Creek until late September 2010. Autumn Creek’s physical
facility was small, and soon after Mountain Wood placed its first firewood order, Autumn
Creek began experiencing “production bottlenecks” in producing the bagged firewood.
After this rocky start, Mountain Wood began steadily placing orders with Autumn Creek.
As retailers placed orders with Mountain Wood, Mountain Wood gave Autumn Creek the
first option to ship it the firewood needed for the retailers’ orders. However, it is undisputed
that Mountain Wood also had firewood supply contracts with several other suppliers. In
general, when Mountain Wood placed a firewood order with Autumn Creek, Autumn Creek
would inform Mountain Wood’s dispatcher how much of the order it would be able to fill,
and would also give the dispatcher an estimate of when Autumn Creek would be able to
fulfill the remainder of Mountain Wood’s order. If Mountain Wood needed more wood than
Autumn Creek could timely supply to meet the demands of Mountain Wood’s customers,
Mountain Wood would order the balance of the needed firewood from other suppliers,
including a supplier called Cowboy Charcoal. This pattern continued throughout fall and
winter of 2010.
At some point during the 2010-2011 firewood season, difficulties arose regarding the lack
of Mountain Wood bags provided to Autumn Creek. Autumn Creek said it was under the
impression that all of the firewood to be sent to Mountain Wood had to be bagged in
Mountain Wood’s “Fresh Pack” bags, and Autumn Creek indicated that Mountain Wood did
not provide them with the number of bags needed. At some point, Mountain Wood gave
Autumn Creek permission to heat-shrink the firewood instead of bagging it, but this directive
strained Autumn Creek’s production capacity as well.
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Over the course of the 2010-2011 firewood season, Autumn Creek sent Mountain Wood 49
invoices for firewood supplied. Mountain Wood paid 5 of the 49 invoices within the 30 days
set forth in the parties’ Supply Contract, and paid 28 of the invoices after the 30-day period.
Mountain Wood failed to pay 16 of the invoices, a total of $45,165. Mountain Wood’s
failure to timely pay the invoiced amounts placed financial strain on Autumn Creek.
Toward the end of the firewood season, a complaint surfaced that a shipment of firewood
that originated with Autumn Creek contained moldy wood. Autumn Creek apparently took
back the returned bundles of firewood. Autumn Creek claimed that it issued Mountain
Wood a credit for approximately $3,000 in accordance with the damages clause in the Supply
Contract, quoted above.
Concerned about Autumn Creek’s ability to fill its firewood orders, Mountain Wood entered
into a contract with another firewood supplier, Dixie Wood Products. Even after Mountain
Wood entered into the Dixie Wood Products supply contract, the same issues between
Mountain Wood and Autumn Creek persisted.
In February 2011, Autumn Creek sent Mountain Wood a request for more firewood bags.
Shortly after that, on February 14, 2011, Mountain Wood sent Autumn Creek an email
indicating that Mountain Wood did not plan to place any more firewood orders with Autumn
Creek. In reply to Autumn Creek’s request for clarification, Mountain Wood informed
Autumn Creek that it was terminating the Supply Contract, citing Autumn Creek’s
performance issues, including the moldy wood. By that time, Autumn Creek had supplied
Mountain Wood approximately 68,750 of the 150,000 bags of firewood referenced in the
Supply Contract.2
When Mountain Wood informed Autumn Creek it would place no more firewood orders,
Autumn Creek stopped producing firewood because it felt that it would be unable to sell it.
However, at the time Autumn Creek received the termination notice from Mountain Wood,
Autumn Creek already had on hand approximately 10,800 bundles of palleted and bagged
firewood ready to be shipped. In order to salvage some compensation for the firewood it had
on hand, Autumn Creek disassembled the pallets and sold the firewood as ricked wood for
approximately $12,000.
2
There was some dispute in the trial testimony over the number of bundles of firewood Autumn Creek
supplied. In its oral ruling, the trial court recited figures that indicated which witness’s testimony it credited.
We are required on appeal to defer to the trial court’s assessment of the witnesses’ credibility, so we recite
in the facts the figure utilized by the trial court.
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On June 23, 2011, Mountain Wood filed this breach-of-contract lawsuit in the Chancery
Court of Bledsoe County. The lawsuit sought damages in the amount of $35,373.50 for
increased firewood costs and freight charges Mountain Wood claimed it incurred as a result
of Autumn Creek’s repeated failure to deliver the quantity of bagged firewood Mountain
Wood ordered within the time period requested. Mountain Wood acknowledged that it owed
Autumn Creek $37,155 as payment for outstanding invoices, but it sought “to setoff monies
due as damages for breach of contract from monies owed” to Autumn Creek. After the setoff,
Mountain Wood claimed, it owed Autumn Creek only $1,781.50.
In August 2011, in response to Mountain Wood’s complaint, Autumn Creek filed an answer
and a counterclaim. Autumn Creek’s counterclaim cited many alleged prior breaches by
Mountain Wood, including failure to adequately supply firewood bags, failure to pay
invoices, refusal to take firewood in early September 2010, and refusal to place additional
orders after mid-February 2011. Autumn Creek alleged that Mountain Wood and its
principal owner David Creely were aware of the financial strain its failure to pay invoices
placed on Autumn Creek. Based on this allegation, Autumn Creek’s counterclaim also
asserted other causes of action including conspiracy, fraud, and tortious interference with
prospective business. Discovery ensued.
Eventually, the trial court granted summary judgment in favor of Mountain Wood on all of
Autumn Creek’s claims of fraud and conspiracy, as well as all claims against David Creely
individually.3 The trial court permitted Autumn Creek’s claims for breach of contract and
tortious interference with prospective business to proceed, along with Mountain Wood’s
breach of contract claim.
The trial court conducted the trial in November 2012. The trial court heard testimony from
several witnesses who were representatives of both parties. Mr. Creely did not testify.
The owner of Autumn Creek, Mr. Josh Crace, testified at the outset of the trial. Mr. Crace
described his initial interactions with Mountain Wood and the negotiations that led to the
execution of the parties’ Supply Contract. He acknowledged that, while he had an
expectation that Mountain Wood would place firewood orders throughout the firewood
season, the Supply Contract did not include a shipping schedule. Mr. Crace said, however,
that Mountain Wood representatives saw Autumn Creek’s small storage facility. Given
Mountain Wood’s knowledge of these space limitations, Mr. Crace maintained that Mountain
Wood had to know that it was important for Mountain Wood to take firewood from Autumn
Creek at the beginning of the firewood season, so that Autumn Creek could empty its storage
3
The trial court heard the parties’ respective summary judgment motions in October 2012; however, the trial
court’s order on these motions was not entered until August 2013, nunc pro tunc to October 29, 2012.
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space to make room for the firewood for future orders. Mr. Crace said that, when he signed
the Supply Contract, he expected that he would not have to deliver all the wood Mountain
Wood requested when they requested it, only that shipments would take place periodically
throughout firewood season and the last shipment would occur on March 31 st.
Mr. Crace acknowledged that Autumn Creek was unable to fill all of Mountain Wood’s
requests. He cited various reasons for the inability to do so, including packing problems,
employee resignations, weather conditions, and lack of bags.
Mr. Crace explained that, when he received the February 2011 email from a Mountain Wood
employee stating that Mountain Wood was “done,” he tried to call Mr. Creely with Mountain
Wood but could not reach him. At that point, Autumn Creek stopped producing firewood
because Mr. Crace did not think they would be able to sell what they had on hand. Autumn
Creek ended up selling its remaining firewood by the rick for $12,000. Mr. Crace testified
that, had Mountain Wood purchased this firewood as Autumn Creek expected, Autumn
Creek would have received approximately $30,000 for it.
Asked if Autumn Creek would have been able to fulfill the remainder of the Supply Contract
had Mountain Wood not terminated it, Mr. Crace responded:
If it had come February 14th and [Mountain Wood] said, we want all that
wood, I’d give you assurances we’re going to buy all that wood. There’s no
way I could have produced 70,000 bundles myself from February 14th to
March 31st, but I would have went to Cowboy Charcoal and I’d have got that
wood and I’d have sold it to you and I would have met my contract. . . . I
absolutely could have fulfilled this contract.
Mr. Crace claimed he would have rented additional storage space and hired a transfer
company to move Autumn Creek’s finished firewood so that he could produce more, and in
addition he would have purchased from Cowboy Charcoal whatever firewood he could not
produce.
Mr. Crace testified that, in the firewood industry, major retailers begin placing orders for the
next year in February, March, and April. He claimed that Autumn Creek would have been
a strong candidate for a contract in 2011 with Publix, one of Mountain Wood’s biggest
customers, had Mountain Wood complied with the Supply Contract. Instead, Mountain
Wood’s failure to timely pay invoices created financial issues for Autumn Creek that left it
in a poor position to pursue the Publix business. Mr. Crace acknowledged, however, that
Publix had a stronger relationship with Mountain Wood than with Autumn Creek.
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Mountain Wood employee Courtney Nichols testified that Mountain Wood sold 890,700
bundles of firewood to various retailers during the 2010-2011 firewood season. She said that
Autumn Creek provided 68,750 of that total number of bundles of firewood. Ms. Nichols
explained that often the firewood Mountain Wood obtained from Cowboy Charcoal was
cheaper than the firewood it obtained from Autumn Creek, but the shipping and freight costs
for the Cowboy Charcoal firewood were higher, so overall Mountain Wood made less money
when it had to secure its firewood from Cowboy Charcoal. Ms. Nichols testified that,
because Mountain Wood had to cover for the firewood Autumn Creek was unable to supply,
Mountain Wood suffered damages in the amount of $36,396.
The trial court also heard testimony from Chelli Winkler, one of the owners of Mountain
Wood and its vice president of operations. At the beginning of the 2010-2011 firewood
season, Ms. Winkler said, she anticipated that Mountain Wood would sell “[a] million, little
over a million” in firewood that season. She was unaware of any conversation with Mr.
Crace concerning a schedule for deliveries or a pattern of orders from retailers during the
firewood season. She explained that Mountain Wood does not “get a choice when we
deliver. When the retailer asks for [an order of firewood], we have to give it to them. . . [o]r
we lose them . . . . Basically, they fire us.” After she and Mr. Creely visited Autumn Creek’s
facilities, Ms. Winkler said, they were concerned that Autumn Creek “wasn’t going to be
able to keep– you know to produce it” and “that he didn’t have enough storage and all that.”
Because of that concern, Mountain Wood contracted with Cowboy Charcoal as an additional
supplier. Later in the season, Mountain Wood contracted with Dixie Wood Products to meet
their customers’ demand. Ms. Winkler estimated that the contract with Cowboy Charcoal
was for 250,000 bags of firewood.4
At the conclusion of the testimony, the trial court issued an oral ruling. The trial court first
noted that Mountain Wood had inspected Autumn Creek’s facilities and acknowledged
having concerns about Autumn Creek’s capacity to produce, store, and provide the quantity
of goods that were requested. Because of these concerns, in addition to contracting with
Autumn Creek, Mountain Wood contracted with Cowboy Charcoal to supply wood during
the 2010-2011 firewood season and then “[l]ater in the firewood season . . . [to buy] from
Dixie Firewood [sic].” The trial court observed that the parties had different expectations
about how orders would be placed. Mr. Crace testified that he expected orders to come in
steadily and that Autumn Creek would have time to fill them, but Mountain Wood instead
tended to place orders in bunches for immediate delivery. The trial court commented that
this was likely “why timeliness was not specified in the contract.” The trial court then made
the following findings of fact and conclusions of law:
4
The record does not include a figure to Dixie Wood Products.
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The Court finds from the evidence in favor of the defendant on the plaintiff’s
breach of contract claim. The issue of timeliness and delay are not clearly
spelled out. The contract calls for the defendant to furnish the plaintiff a
hundred and fifty thousand bags of seasoned firewood between August 1st,
2010, and March 31st, 2011. The defendant had 10,800 bags of firewood on
hand in February of 2011 when the plaintiff stopped ordering. The defendant
stopped producing because the plaintiff stopped ordering.
The Court finds the plaintiff was to provide the bags to be used for bagging
and clearly they failed to do this, which caused delays in the defendant’s
production of bagged firewood. I further find the plaintiff was contractually
obligated to buy 250,000 bags of firewood from Cowboy Charcoal and the
purchases argued as cover were not covered but by contract. They only
purchased 201,000 of the 250,000 contracted. This is true for Dixie Firewood
purchases, as well.
Plaintiff was aware from the beginning that the defendant may not be able to
produce after inspecting their facilities and considering it was their first year
of operation. Further, the plaintiff anticipated sales of on[e] million bags to
be sold, but in fact, sold 890,000, and they met all deliver[ie]s on sales and I
find they were not damaged.
The defendant has prevailed upon its counter-claim for unpaid invoices. The
testimony of Josh Crace from the Bates stamped invoices shows $42,165 in
unpaid invoices. The defendant had 10,800 bags of firewood on site at a price
of $2.10 per bag that the plaintiff did not pick up. The plaintiff owes $22,680
less $12,000 the plaintiff received for selling this by the rick, or an additional
$10,680 in damages.
The defendant is not entitled to lost profits. The testimony on lost profits was
too speculative. The defendant has failed to carry its burden of proof on the
counter-claim for intentional interference with prospective business
relationships. The defendant has failed to show the plaintiff formed the
requisite intent to interfere. Dispute between the parties appears to be over
damages and offsets to damages. The Court finds there was only one contract
and not a second or oral contract for the kiln-dried firewood.
I award the defendant prejudgment interest at the statutory rate for the unpaid
invoices from the date of demand by letter dated March the 8th, 2011. The
court costs are assessed against the plaintiff. Contract did not provide for the
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payment of attorney’s fees, so each party will be responsible for their own
attorney’s fees.
In June 2013, the trial court entered a written order. The order incorporated its previous oral
ruling and found in favor of Autumn Creek on its breach of contract claim. The trial court
reiterated that Autumn Creek was entitled to $45,165 in unpaid invoices and $10,680 in
additional damages for firewood produced and sold by the rick for less than what it would
have otherwise made. The trial court found in favor of Mountain Wood on Autumn Creek’s
claims for lost profits and tortious interference. The trial court also awarded Autumn Creek
pre-judgment interest on the unpaid invoices.
From this order, both parties appeal.
ISSUES P RESENTED AND S TANDARD OF R EVIEW
On appeal, Mountain Wood raises the following issues:
Whether the Chancery Court erred in holding that Autumn Creek was not
liable for delays in providing bagged firewood to Mountain Wood as expressly
provided for under the Supply Contract.
Whether the Chancery Court erred in finding Autumn Creek had not breached
the Supply Contract with Mountain Wood by failing to produce the contractual
amount of firewood and by failing to produce firewood in the time for delivery
to retailers, and is therefore liable to Mountain Wood for cover damage.
Whether the Chancery Court erred in its award of damages to Autumn Creek,
and its award for unpaid invoices which the parties were not disputing, and
which amount of damages had been agreed.
Autumn Creek raises the following additional issues:
Whether the Chancery Court erred in its failure to award additional damages
to Autumn Creek for lost profits under the Supply Contract.
Whether the Chancery Court erred in its failure to award additional damages
to Autumn Creek for tortious interference with prospective business.
Because this case was heard by a trial court sitting without a jury, we review the case de novo
upon the record. The trial court’s findings of fact are accorded a presumption of correctness,
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unless the evidence preponderates to the contrary. See Tenn. R. App. P. 13(d); Wright v.
City of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). To the extent that the trial court’s
factual findings are based on its assessment of witness credibility, the appellate court will not
reevaluate the trial court’s credibility determinations absent clear and convincing evidence
to the contrary. Jones v. Barrett, 92 S.W.3d 835, 838 (Tenn. 2002). Questions of law are
reviewed de novo with no presumption of correctness. Id. The interpretation of a contract
is a question of law and thus is not entitled to a presumption of correctness on appeal.
Forrest Const. Co., LLC v. Laughlin, 337 S.W.3d 211, 220 (Tenn. Ct. App. 2009) (citing
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999); Angus v. Western Heritage
Insurance Co., 48 S.W.3d 728, 730 (Tenn. Ct. App. 2000)). Accordingly, the appellate
court will reach its own independent conclusions regarding the meaning and legal import of
contractual terms. Forrest Const. Co., LLC, 337 S.W.3d at 220 (citing Guiliano, 995
S.W.2d at 95; Hillsboro Plaza Enterprises v. Moon, 860 S.W.2d 45, 47 (Tenn. Ct. App.
1993)).
A NALYSIS
On appeal, Mountain Wood essentially argues that the trial court erred in failing to find that
Autumn Creek committed the first material breach of the Supply Contract, and in failing to
award Mountain Creek damages against Autumn Creek for its breach. Mountain Wood
contends that Autumn Creek breached the contract in two ways, “by failing to provide
enough wood and provide it in a reasonable time.”
We first address Mountain Wood’s assertion that Autumn Creek committed the first material
breach of the Supply Contract by failing to provide the firewood Mountain Wood ordered
within a reasonable time. Mountain Wood argues that, under the parties’ agreement, Autumn
Creek was required “to get orders out when needed” and its failure to do so constituted a
breach of the Supply Contract.
The cardinal rule of contract interpretation is to ascertain and give effect to the intention of
the parties. White v . Empire Exp., Inc., 395 S.W.3d 696, 714 (Tenn. Ct. App. 2012) (citing
Christenberry v. Tipton, 160 S.W.3d 487, 494 (Tenn. 2005)). In interpreting a contract, we
first look to the ordinary meaning of the language in the contract. 84 Lumber Co. v. Smith,
356 S.W.3d 380, 383 (Tenn. 2011). The only temporal language in the Supply Contract that
could be deemed applicable to delivery is contained in the paragraph with the heading “Term
of Agreement,” which states, “This Supply Contract shall be for the 2010-2011 Retail
Firewood Season beginning on the date stated above until midnight on the 31st day of March,
2011.” From our review of the Supply Contract, we agree with the trial court that the
agreement does not specify delivery deadlines and “the issues of timeliness and delay are not
clearly spelled out.”
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Mountain Wood acknowledges that the Supply Contract does not contain an express
provision on delivery deadline, but urges this Court to supply reasonable terms for delivery.
Mountain Wood contends that this Court can infer from industry norms and the course of
dealing between the parties that a reasonable time for delivery of ordered firewood would be
“a few days for most orders” or “within a week from the date of the receipt of a purchase
order to the expected delivery date.”
In response, Autumn Creek contends that the Supply Contract contains nothing that would
require Autumn Creek to produce firewood in the quantities and on the schedule that
Mountain Wood requested. Autumn Creek maintains that the argument Mountain Wood
now makes “does not square with the contract that Mountain Wood drafted” and “simply
isn’t the deal that the parties entered into.”
In essence, Mountain Wood asks this Court to supply a term to the parties’ agreement,
namely, delivery deadlines. When the parties’ bargain is sufficiently definite to be a contract,
but they have not agreed with respect to a term that is necessary to a determination of their
rights and duties, a term which is reasonable may be supplied by the court. German v. Ford,
300 S.W.3d 692, 706 (Tenn. Ct. App. 2009) (citing Restatement (Second) of Contracts § 204
(1981)). For example, “failure of the parties to fix a time or a definite time for performance
does not normally defeat a contract.” Id. (citing First Nat’l Bank of Bluefield v. Clark, 447
S.E.2d 558, 562 (W. Va. 1994)). In that situation, the court may imply a term requiring
performance within a reasonable time under the circumstances. Id. (citing Minor v. Minor,
863 S.W.2d 51, 54 (Tenn. Ct. App. 1993)).
In this case, the trial court heard testimony from Mountain Wood witnesses about the pattern
of orders from customers. The Mountain Wood witnesses described the imperative that
Mountain Wood deliver the firewood ordered by customers promptly or risk losing the
customers and explained that was why they expected Autumn Creek to deliver the firewood
ordered very soon after Mountain Wood ordered it. Thus, in effect, the Mountain Wood
witnesses described an “industry norm” that Autumn Creek allegedly should have understood
when the parties executed the Supply Contract and explained why the trial court should imply
a term in the Supply Contract requiring Autumn Creek to deliver firewood within a short
time after Mountain Wood placed each order. Under this scenario, Mountain Wood
contends, Autumn Creek breached the Supply Contract. “In addition to the explicit terms,
contracts may be accompanied by implied duties, which can result in a breach.” Federal Ins.
Co. v. Winters, 354 S.W.3d 287, 291 (Tenn. 2011) (citing Aetna Cas. & Sur. Co. v. Gilreath,
625 S.W.2d 269, 275 (Tenn. 1981)).
This argument is not unreasonable. However, Autumn Creek’s owner, Mr. Crace, clearly
testified that his expectations going into the 2010-2011 firewood season were not in line with
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the alleged industry norm to which the Mountain Wood witnesses testified. The trial court
heard the testimony of the witnesses and chose not to credit Mountain Wood’s assertion that
both parties would necessarily have understood its anticipated delivery pattern to be an
industry norm and would have had this expectation going into the 2010-2011 firewood
season. As the trial court saw and heard the witnesses’ demeanor, we must defer to the trial
court’s assessment of their credibility. Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783
(Tenn. 1999). Consequently, we decline Mountain Wood’s invitation to imply its proposed
delivery deadlines into the Supply Contract.
As noted above, the Supply Contract states that the term of the parties’ agreement would be
“for the 2010-2011 Retail Firewood Season beginning on the date stated above until
midnight on the 31st day of March, 2011.” It states further that Mountain Wood “agrees to
purchase from [Autumn Creek] 150,000 .75 cubic feet bags of firewood.” Apparently
interpreting these contractual provisions together, the trial court held, “The contract calls for
[Autumn Creek] to furnish [Mountain Wood] a hundred and fifty thousand bags of seasoned
firewood between August 1st, 2010, and March 31st, 2011.” Putting aside the testimony of
the Mountain Wood witnesses that the trial court apparently declined to credit, we cannot
disagree with the trial court’s construction of the Supply Contract.
Mountain Wood argues that it is “absurd” to interpret the Supply Contract as requiring only
that Autumn Creek deliver all of the firewood before March 31, 2011, as this would have
forced Mountain Wood to cease operations. Mountain Wood contends that the parties clearly
intended for delivery times to be set by Mountain Wood, and it points to Autumn Creek’s
limited storage space as indicating that Autumn Creek intended to prepare orders throughout
the season instead of delivering all 150,000 bundles of firewood at one time.
We agree that Autumn Creek’s modest storage space indicated that it did not intend to store
all 150,000 bags of firewood at once. Indeed, both parties’ testimony conveyed an
expectation that the firewood would not be delivered all at once. This is different, however,
from interpreting the Supply Contract as requiring that Autumn Creek deliver the firewood
Mountain Wood ordered shortly after each order was placed. As pointed out by Autumn
Creek, the Supply Contract was drafted by Mountain Wood. Mountain Wood had the
opportunity to include a provision in the Supply Contract requiring delivery of the firewood
within a short time after each order was placed, but it failed to do so. Under these
circumstances, we find no error in the trial court’s holding that Autumn Creek did not breach
the contract by failing to promptly provide firewood to fill Mountain Wood’s orders.
Mountain Wood argues next that Autumn Creek breached the Supply Contract by failing to
provide Mountain Wood the 150,000 bundles of firewood called for in the agreement. It is
undisputed that Autumn Creek produced and delivered to Mountain Wood approximately
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half of the contracted 150,000 bundles of firewood. Mountain Wood claims this constituted
a breach of the Supply Contract. Mountain Wood asserts that it could have sold the
additional bags of firewood specified in the Supply Contract had it been able to obtain more
firewood from its suppliers, and therefore suffered damages in the form of lost opportunity
to sell the balance of the firewood Autumn Creek was obliged to deliver.
The trial court found that Autumn Creek “stopped producing [bagged firewood] because
[Mountain Wood] stopped ordering.” The evidence in the record supports this finding. In
fact, as noted by the trial court, when Mountain Wood stopped ordering, Autumn Creek had
firewood on hand that it sold elsewhere. Thus, we cannot know whether Autumn Creek
could have supplied Mountain Wood with the approximately 150,000 bundles of bagged
firewood called for in the Supply contract by the March 31, 2011 deadline, because Mountain
Wood repudiated the parties’ agreement before that deadline. In addition, the trial court
found that Mountain Wood “met all deliver[ie]s on sales and . . . they were not damaged.”
The record supports this finding as well. Mountain Wood submitted no proof of an order
from a retail customer that it was unable to fill.
Mountain Wood argues next that even if Autumn Creek did not breach the Supply Contract,
Autumn Creek’s inability to meet Mountain Wood’s demand caused delays and Autumn
Creek should be liable for damages due to these delays under the damages provision in the
Supply Contract. Mountain Wood asserts that, because Autumn Creek was unable to provide
firewood in the volume needed for its customers, Mountain Wood had to pay more to other
suppliers to meet the demand. Mountain Wood claims that it paid a total of $36,396 more
than it would have paid had Autumn Creek provided the firewood needed. It contends that
Autumn Creek should be liable for this amount in “cover” damages.
The trial court held that Autumn Creek was only obligated under the Supply contract to
provide the contracted amount of firewood by March 31, 2011, so Autumn Creek did not
breach its agreement with Mountain Wood. We have affirmed this ruling. As such, there
was no breach of the Supply Contract by Autumn Creek, by delay or otherwise, for Mountain
Wood to “cover.” The trial court declined to award Mountain Wood such “cover” damages,
and we agree with the trial court.
Finally, Mountain Wood contends that, even if Autumn Creek did not breach the Supply
Contract, the trial court improperly calculated the damages awarded to Autumn Creek.
Mountain Wood argues that the trial court “obviously” improperly used a figure of $45,165
contained in a demand letter that was made a trial exhibit. It also argues that the trial court
erred in giving Autumn Creek credit for having paid $3,000 to Mountain Wood for the moldy
wood that was returned, when in fact Mr. Crace’s testimony would not support it.
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We have carefully reviewed the disputed testimony and exhibits, and they are not a model
of clarity. However, giving deference to the trial court’s assessment of the credibility of Mr.
Crace’s testimony, we find there is sufficient support in the record for the trial court’s
calculation of the award of damages to Autumn Creek.
We turn now to the issues raised on appeal by Autumn Creek. Autumn Creek argues that the
trial court erred in declining to award it damages for lost profits on the balance of the
firewood that Mountain Wood did not purchase under the Supply Contract. Autumn Creek
contends that it would have sold Mountain Wood 71,000 bags of firewood had Mountain
Wood not repudiated and breached the Supply Contract. This firewood, Autumn Creek
asserts, would have generated a profit of $63,190. In response, Mountain Wood contends
that Autumn Creek never produced the firewood for which it seeks payment, so awarding
damages for it would give Autumn Creek a windfall.
In addressing this issue, the trial court held that the proof submitted by Autumn Creek on its
alleged lost profits was “too speculative.” After examining the testimony on this issue, we
agree. Though lost profits need not be proven with mathematical precision, “to recover lost
profits, they must be proven with reasonable certainty and cannot be remote or speculative.”
Tire Shredders, Inc. v. ERM-N. Cent., Inc., 15 S.W.3d 849, 857 (Tenn. Ct. App. 1999).
Mr. Crace outlined a number of things he would have had to do to meet Mountain Wood’s
demand, such as renting additional storage space and enlisting assistance from Cowboy
Charcoal, and even conceded, “There’s no way I could have produced 70,000 bundles myself
from February 14th to March 31st.” We agree with the trial court and affirm its decision not
to award Autumn Creek damages on this claim.
Finally, Autumn Creek contends that the trial court erred in declining to award it damages
for Mountain Wood’s alleged tortious interference with Autumn Creek’s prospective
business advantage. The trial court held that Autumn Creek failed to carry its burden of
proof on intentional interference and specifically failed to prove that Mountain Wood
“formed the requisite intent to interfere.” 5
We agree with the trial court. Indeed, after reviewing Mr. Crace’s rather optimistic
testimony on how Autumn Creek could have taken Mountain Wood’s Publix business had
5
In order to prevail on this claim, Autumn Creek must establish: (1) an existing business relationship with
specific third parties or a prospective relationship with an identifiable class of third persons; (2) the
defendant’s knowledge of that relationship and not a mere awareness of the plaintiff's business dealings with
others in general; (3) the defendant’s intent to cause the breach or termination of the business relationship;
(4) the defendant's improper motive or improper means; and finally, (5) damages resulting from the tortious
interference. Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002).
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Mountain Wood not interfered, we would add that Autumn Wood did not carry its burden
of proof on any of the elements of the claim. We affirm the trial court’s ruling on this issue
as well.
Accordingly, we affirm the trial court’s ruling. All other issues raised on appeal are
pretermitted by this decision.
C ONCLUSION
The decision of the trial court is affirmed. Costs on appeal are assessed one-half against
Appellant Mountain Wood and its surety and one-half against Appellee Autumn Creek, for
which execution may issue if necessary.
___________________________
HOLLY M. KIRBY, JUDGE
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