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1. Guaranty_default by company after stockholder buyout_mitigation of damages
There were no issues of material fact concerning the failure of one of the three initial
stockholders and guarantors of a business to mitigate his damages after the business defaulted and
payment was sought from the guarantors.
2. Contracts_condition precedent_stock sale with indemnity clause_no condition in
contract language
There was no genuine issue of material fact concerning the failure of a condition precedent
in a stock sale contract with an indemnity clause. The plain language of the contract does not require
a condition to occur before the contract is valid.
3. Contracts_indemnification_waiver
There were no genuine issues of material fact concerning a waiver by a former stockholder
(Marchese) of the right to seek indemnification from the stockholder who had bought him out. A
waiver is an intentional relinquishment or abandonment of a known right or privilege; neither the
record nor the parties here indicate that Marchese expressly waived his right to indemnification, nor
did he do so impliedly.
4. Appeal and Error_preservation of issues--argument not supported by authority
An argument not supported by authority was not properly before the Court of Appeals.
5. Costs_attorney fees_guaranty assumption in stock purchase agreement_indemnity
The trial court did not abuse its discretion in awarding attorney fees pursuant to N.C.G.S. §
6-21.2 of less than fifteen percent of the indemnity for breach of an assumption of a guaranty of
payment in a stock purchase agreement where the agreement contained a provision for the payment
of attorney fees and the amount of attorney fees awarded was supported by attorney testimony,
affidavits and billing statements.
Appeal by third party defendant Joe Carl Rowe from the
judgement entered 13 November 2003 by Judge Christopher M. Collier
in Alexander County Superior Court. Heard in the Court of Appeals
22 February 2006.
The Law Firm of J. Richardson Rudisill, Jr., by Donna N.
Price, for third party plaintiff-appellees.
Sigmon, Clark, Mackie, Hutton, Hanvey & Ferrell, P.A., by
Warren A. Hutton and Stephen L. Palmer, for third party
defendant-appellant.
JACKSON, Judge.
Third-party defendant Joe Carl Rowe (“Rowe”) appeals from the
trial court's entry of summary judgment and attorney fees award in
favor of defendant/third-party plaintiff Mark J. Marchese
(“Marchese”). On or about 8 December 1992, Lake Hickory
Watercraft, Inc. (“Lake Hickory”) was incorporated in North
Carolina, and Lake Hickory issued a total of three stock
certificates of ninety shares each. John T. Adair (“Adair”),
Stanley Peters (“Peters”), and Marchese each received one
certificate. On 6 January 1993, Bombardier Capital, Inc.
(“Bombardier”) and Lake Hickory entered into a security agreement
pursuant to which Bombardier advanced funds to Lake Hickory in
exchange for a security interest in Lake Hickory's inventory. The
following day, Adair, Peters, Marchese, and their respective wives
each signed a guaranty providing that each signing party would
“guarantee full and prompt payment to [Bombardier] of all
obligations of [Lake Hickory] to [Bombardier].” (the “Guaranty”)
Peters died sometime between signing the Guaranty and the date of
this action.
On 24 June 1998, Marchese and Rowe entered into a contract for
the sale of Marchese's ninety shares of stock for nine thousanddollars (the “Contract”). The Contract contained the following two
provisions:
2. . . . That as further consideration for
this purchase, [Rowe] agrees to assume, and
pay, and save [Marchese] harmless from any
direct or indirect liability arising out of or
through any indebtedness, obligation, or
undertaking of . . . Bombardier Capital
(Account number 691119) . . . including
reasonable attorneys fees in defense of the
same, and specifically, but not by way of
limitation, any guarantees of either
[Marchese], individually, or of . . .
Bombardier Capital (Account number 691119).
3. That [Rowe] shall provide to [Marchese], at
closing, written verification that [Marchese]
has been released of any and all guarantees,
notes, or obligations, of [Marchese] to . . .
Bombardier Capital[.]
Notwithstanding the requirement of Contract provision 3, Rowe
did not provide a written verification to Marchese that he had been
released of any and all guarantees, notes, or obligations.
Nonetheless, Marchese proceeded with the closing because he thought
that the written verification “would be forthcoming.” In 1999,
Lake Hickory failed to meet its obligations pursuant to the
security agreement, therefore breaching the security agreement. As
a result, on 4 April 2000, Bombardier filed a complaint against
Lake Hickory, Marchese, Adair, and Peters' wife (hereinafter
collectively referred to as “defendants”) for, inter alia, breach
of contract and breach of guaranty. On 26 July 2000, Marchese
filed an answer and a third-party complaint against Rowe seeking
indemnification and attorney fees pursuant to the Contract.
On 21 August 2002, Bombardier filed a motion for summary
judgment against defendants. After a hearing on Bombardier'ssummary judgment motion, the Honorable Christopher M. Collier
entered summary judgment against defendants and awarded $237,096.17
in damages and $35,564.00 in attorney fees to Bombardier.
On 20 October 2003, Marchese filed a motion for summary
judgment against Rowe alleging, inter alia, that there is no
genuine issue of material fact as to Marchese's claim for breach of
contract and indemnification. On 13 November 2003, the Honorable
Christopher M. Collier entered summary judgment in favor of
Marchese, and ordered that Rowe pay Marchese $165,000 and that
Marchese's application for attorney fees be addressed by separate
order. Rowe appealed.
On 1 March 2005, this Court dismissed Rowe's appeal as
interlocutory because the trial court had not entered summary
judgment in favor of Mrs. Marchese, had not ruled on Rowe's motion
for summary judgment, and had held open Marchese's application for
attorney fees in an unpublished opinion.
See Bombardier Capital,
Inc. v. Lake Hickory Watercraft, Inc., 168 N.C. App. 728, 609
S.E.2d 497 (2005) (unpublished opinion).
Marchese filed a motion for attorney fees against Rowe, and on
6 June 2005, the Honorable Christopher M. Collier ordered that
Marchese was entitled to $21,500 in attorney fees and $1,780.24 in
costs. Thereafter, Mrs. Marchese filed for voluntary dismissal.
Rowe filed a timely appeal of the 13 November 2003 summary judgment
order and 6 June 2005 order granting attorney fees and expenses.
On appeal, Rowe argues the trial court erred in granting
summary judgment in favor of Marchese because genuine issues ofmaterial fact exist concerning (1) Marchese's failure to mitigate
his damages; (2) the failure of a condition precedent in the
Contract between the parties; (3) Marchese's waiver of the right to
seek indemnification from Rowe; and (4) whether Mrs. Marchese was
an intended beneficiary of the Contract between the parties such
that any payment made to secure a release of Mrs. Marchese from the
judgment should not be included in any amount determined to be owed
to Marchese by Rowe. In addition, Rowe argues the trial court
erred in awarding attorney fees on the grounds that the award is
contrary to existing law and unsupported by the evidence. We first
address the summary judgment issues, then proceed to the attorney
fees issue.
Summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that any party is entitled to a
judgment as a matter of law.” N.C. Gen. Stat. . 1A-1, Rule 56(c)
(2005). In deciding a motion for summary judgment, a trial court
must consider the evidence in the light most favorable to the non-
moving party. See Summey v. Barker, 357 N.C. 492, 496, 586 S.E.2d
247, 249 (2003). If there is any evidence of a genuine issue of
material fact, a motion for summary judgment should be denied.
Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 471, 597 S.E.2d 674,
694 (2004). We review an order allowing summary judgment de novo.
Id. at 470, 597 S.E.2d at 693. [1] Rowe first contends the trial court erred in granting
summary judgment because genuine issues of material fact exist
concerning Marchese's failure to mitigate his damages. Our Court
has held that in an action for tort committed or breach of contract
without excuse, it is a well settled rule of law that the party who
is wronged is required to use due care to minimize the loss. First
Nat'l Pictures Distrib. Corp. v. Seawell, 205 N.C. 359, 360, 171
S.E. 354, 355 (1933). However, “[t]he duty to mitigate damages
arises only after a breach occurs.” Strader v. Sunstates Corp.,
129 N.C. App. 562, 575, 500 S.E.2d 752, 759, disc. rev. denied, 349
N.C. 240, 514 S.E.2d 275 (1998)
.
Here, Marchese's liability under the Guaranty with Bombardier
arose when Lake Hickory defaulted and Bombardier sought payment
from the individual guarantors. Marchese satisfied his obligation
to Bombardier under the Guaranty, and sought indemnification from
Rowe pursuant to the Contract. Rowe's argument that the breach
occurred when Lake Hickory failed to comply with the security
agreement is incorrect. In contrast, the breach complained of
occurred when Rowe failed to indemnify Marchese pursuant to
Contract provision 2, and Marchese mitigated damages by sending a
letter informing the creditor of his stock sale Contract and by
sending a letter to Rowe clearly expressing his intention to
enforce the Contract's indemnity clause. Therefore, Marchese
mitigated damages, and is entitled to recover from Rowe under the
Contract. [2] Next, Rowe argues that the trial court erred in granting
summary judgment because genuine issues of material fact exist
concerning the failure of a condition precedent in the Contract
between the parties. As a general rule, conditions precedent “'are
those facts and events, occurring subsequently to the making of a
valid contract, that must exist or occur before there is a right to
immediate performance, before there is a breach of contract duty,
before the usual judicial remedies are available.'” Farmers Bank,
Pilot Mountain v. Michael T. Brown Distrib., Inc., 307 N.C. 342,
350, 298 S.E.2d 357, 362 (1983) (quoting 3A A. Corbin, Corbin on
Contracts . 628, at 16 (1960)).
The use of such words as “when,”
“after,” “as soon as,” and the like, give clear indication that a
promise is not to be performed except upon the occurrence of a
stated event. Id. at 351, 298 S.E.2d at 362.
Here, Rowe incorrectly contends that Contract provision 3 is
a condition precedent of the Contract that required him to provide
Marchese with written verification that Marchese had been released
of any and all obligations, and, as a result of Rowe's failure to
provide this written verification, the Contract never existed.
Rowe's argument fails because the plain language of Contract
provision 3 does not require a condition to occur before the
contract is valid. Moreover, Marchese proceeded with the closing
based upon Rowe's mere assurances that the verification was
forthcoming. Therefore, Rowe's failure to provide written
verification does not support a condition precedent, and Rowe's
argument is without merit. [3] Third, Rowe contends the trial court erred in granting
summary judgment because genuine issues of material fact exist
concerning Marchese's waiver of the right to seek indemnification
from Rowe. Specifically, Rowe argues that Marchese waived his
right to indemnification because Rowe did not provide Marchese with
a written verification for release of obligations and Marchese
proceeded with the Contract. This Court has established that
waiver is “'an intentional relinquishment or abandonment of a known
right or privilege.'” Medearis v. Trustees of Myers Park Baptist
Church, 148 N.C. App. 1, 10, 558 S.E.2d 199, 206 (2001), disc. rev.
denied, 355 N.C. 493, 563 S.E.2d 190 (2002) (quoting Johnson v.
Zerbst, 304 U.S. 458, 464, 82 L. Ed. 1461, 1466 (1938)). A waiver
may be express or implied. Id. at 11, 558 S.E.2d at 206. “A
waiver is implied when a person dispenses with a right 'by conduct
which naturally and justly leads the other party to believe that he
has so dispensed with the right.'” Id. at 12, 558 S.E.2d at 206-07
(quoting Guerry v. Am. Trust Co., 234 N.C. 644, 648, 68 S.E.2d 272,
275 (1951).
In the case sub judice, neither the record nor the parties
indicate that Marchese expressly waived his right to
indemnification. Marchese did not impliedly waive his right to
indemnification because he did not engage in conduct that naturally
and justly would lead Rowe to believe he dispensed with his right
to receive indemnification. Specifically, the Contract's
indemnification clause and release clause are two separate
independent clauses, and Rowe's failure to release Marchese fromprior obligations did not waive the indemnification clause.
Therefore, Marchese did not waive his right to indemnification, and
Rowe's argument is meritless.
[4] Rowe's fourth argument states that the trial court erred
in granting summary judgment because there is a material issue of
fact as to whether Mrs. Marchese was an intended beneficiary of the
Contract. The scope of review on appeal is confined to a
consideration of those exceptions set out and made the basis of
assignments of error in the record on appeal. N.C. R. App. P.,
Rule 10 (2006). “Assignments of error not set out in [Rowe's]
brief, or in support of which no reason or argument is stated or
authority cited, will be taken as abandoned.” N.C. R. App. P.,
Rule 28(b)(6) (2006). Rowe failed to cite authority supporting his
fourth argument. For this reason, Rowe's fourth argument is not
properly before us.
[5] Finally, Rowe contends that the trial court erred in
awarding attorney fees on the grounds that the award is contrary to
existing law and unsupported by the evidence. Ordinarily, attorney
fees are not recoverable either as an item of damages or of costs,
absent express statutory authority for fixing and awarding them.
United Artists Records, Inc. v. Eastern Tape Corp., 18 N.C. App.
183, 187, 196 S.E.2d 598, 602, cert. denied, 283 N.C. 666, 197
S.E.2d 880 (1973). However,
[o]bligations to pay attorneys' fees upon any
note, conditional sale contract or other
evidence of indebtedness, in addition to the
legal rate of interest or finance charges
specified therein, shall be valid and
enforceable, and collectible as part of suchdebt, if such note, contract or other evidence
of indebtedness be collected by or through any
attorney at law after maturity, subject to the
following provisions:
. . . .
(2) If such note, conditional sale contract or
other evidence of indebtedness provides for
the payment of reasonable attorneys' fees by
the debtor, without specifying any specific
percentage, such provision shall be construed
to mean fifteen percent (15%) of the
“outstanding balance” owing on said note,
contract or other evidence of indebtedness.
N.C. Gen. Stat. . 6-21.2 (2005), See also Marine Ecology Sys., Inc.
v. Spooners Creek Yacht Harbor, Inc., 40 N.C. App. 726, 730, 253
S.E.2d 613, 616 (1979) (agreements intended as security are
evidence of indebtedness covered under the statute); Stillwell
Enter., Inc. v. Interstate Equip. Co., 300 N.C. 286, 266 S.E.2d 812
(1980) (the statute applies not only to notes and conditional sale
contracts, but also to such other evidence of indebtedness as other
writings evidencing an unsecured debt or any other such security
agreement which evidences both a monetary obligation and a lease of
specific goods). When the trial court determines an award of
attorney fees is appropriate under the statute, the amount of
attorney fees awarded lies within the discretion of the trial
court. Coastal Prod. Credit Ass'n v. Goodson Farms, Inc., 70 N.C.
App. 221, 226, 319 S.E.2d 650, 655, disc. rev. denied, 312 N.C.
621, 323 S.E.2d 922 (1984).
Here, the trial court granted attorney fees in an amount less
than fifteen percent of the $165,000 award. Attorney testimony,
affidavits, and billing statements supported the attorney fees
award. Therefore, the trial court did not abuse its discretion,
and properly awarded attorney fees pursuant to the Contract. Accordingly, we affirm the trial court's award of attorney fees in
favor of Marchese.
In conclusion, we hold that the trial court did not err in
granting summary judgment in favor of Marchese, and ordering that
Marchese is entitled to $21,500 in attorney fees and $1,780.24 in
costs.
AFFIRMED.
Judges TYSON and ELMORE concur.
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