GRACE R. WALDON and
ENVIRONMENTAL WATER SOLUTIONS,
INC., a North Carolina
Corporation,
Plaintiffs
v
.
Union County
No. 01 CVS 1455
DANNY L. BURRIS, JESSE JAMES
WALDON, JR. and ENVIRONMENTAL
WATER SOLUTIONS, INC., an
Oklahoma Corporation,
Defendants
Weaver, Bennett & Bland, P.A., by Michael David Bland, for
plaintiff-appellees.
Wishart, Norris, Henninger & Pittman, P.A., by William A.
Navarro and Steven B. Ockerman, for defendant-appellants.
CALABRIA, Judge.
The instant case involves a second appeal by Danny L. Burris
and Environmental Water Solutions, Inc., an Oklahoma Corporation
(collectively “defendants”). Defendants appeal from a modified
judgment entered awarding Environmental Water Solutions, Inc., a
North Carolina Corporation (“plaintiff”), actual damages, punitive
damages, treble damages under N.C. Gen. Stat. § 75-16, and treble
damages pursuant to 15 U.S.C.A § 1117. We remand in part and
affirm in part. The complete facts are set forth in Waldon v. Burris, COA No.
04-598, 2005 WL 1949624 (2005) (“Waldon I”). The facts relevant
to this appeal are as follows: Grace Waldon and Environmental Water
Solutions, Inc. a North Carolina Corporation (collectively
“plaintiffs”) brought an action against defendants alleging (1)
misappropriation of corporate opportunity, (2) constructive fraud,
(3) constructive trust, (4) unfair and deceptive practices and (5)
violation of the Lanham Act. These claims arose in connection with
a contract procured by defendants to operate a waste water
treatment facility on the Tinker Air Force Base in Oklahoma.
In 1998, Grace Waldon (“Grace”) and her husband, Jesse Waldon
(“Jesse”), began an unincorporated business to act as the sales and
marketing arm of their current business. Danny Burris (“Burris”)
was authorized to act as a selling agent in Oklahoma for the
business and negotiated a contract for waste management at Tinker
Air Force Base. Subsequently, the Waldons incorporated their
company as Environmental Water Solutions, Inc. (“EWSI-NC”) in June
of 1998.
In March of 1999, defendant Burris incorporated his own
company in Oklahoma and named it Environmental Water Solutions,
Inc. (“EWSI-OK”). In the spring of 2000, defendants Burris and
Jesse held a shareholders meeting for EWSI-NC in which they
redistributed the shares of the company. Prior to the shareholder
meeting, Grace owned 51% of the company and Jesse owned 49% of the
company. After the meeting, Jesse owned 51% of the company and
Burris owned 49% of the company. Grace was unaware that themeeting had occurred or that ownership of the company had been
redistributed.
In April 2000, EWSI-NC's bid to manage the wastewater
treatment plant at Tinker Air Force Base was accepted. Instead of
signing the contract in the name of plaintiff, EWSI-NC, Burris
signed the contract in the name of his company, EWSI-OK.
In August of 2000, Jesse informed Grace that he had issued her
shares of EWSI-NC to himself and the remaining shares to Burris and
that he sent the corporate records to Oklahoma. Grace requested
that the records be returned to North Carolina. Grace regained
control of EWSI-NC and instituted an action against Jesse, Burris,
and EWSI-OK as an individual, and on behalf of the corporation. At
trial Grace testified that the EWSI-NC records indicated Burris and
Jesse conspired to cut her out of her profits in the contract by
taking control of EWSI-NC. At the close of all the evidence, the
plaintiffs were granted a directed verdict against Jesse based upon
the entry of default taken against Jesse and the evidence presented
in the case. The jury returned a verdict against defendants and
awarded damages to plaintiffs.
In their initial appeal, defendants assigned error to the
portion of the judgment entered awarding treble the amount of
$1,114,000.00 in damages under Issue #6 because those damages were
not awarded for violation of N.C. Gen. Stat. § 75-1.1. A separate
panel of this Court held that the following questions submitted to
the jury established a prima facie case of unfair and deceptive
practices and that there was an error in the damages awarded. Thedamages awarded under Issue #12 were the damages that the trial
court should have trebled:
9. Did the defendant do ( at least one of) the
following:
(1) Secretly take the Tinker AFB contract
from EWSI-NC and divert the contract to
[EWSI-OK], or
ANSWER: YES
(2) Wrongfully obtain the Tinker AFB
contract by submitting supporting
documents either procured from or
prepared by agents of EWSI-NC, or
ANSWER: YES
(3) Wrongfully obtain the Tinker AFB
contract by claiming [EWSI-NC's]
skilled employees, or
ANSWER: YES
(4) Violate the provisions of 18
U.S.C. 1001?
ANSWER: YES
10. Was the defendant's conduct in commerce or
did it affect commerce?
ANSWER: YES
11. Was the defendant's conduct a proximate
cause of the plaintiff's injury?
ANSWER: YES
12. In what amount, if any, has the plaintiff
EWSI-NC been injured?
ANSWER: $75,000.00
Upon remand, the trial court corrected the error and trebled the
damages awarded under Issue #12. However, the trial court went
further and awarded damages under Issue #8 and punitive damages
under Issue #16. Defendants appeal from the amended judgment.
Defendant Jesse Waldon did not appeal.
I. Punitive Damages
Defendants initially assign error to the punitive damages
awarded under issue #16(a), which reads:
16(a) What amount of punitive damages, if any,
does the jury in its discretion award to the
plaintiff EWSI NC?
ANSWER:$300,000.00
Defendants argue that plaintiffs may not recover treble damages
under Issue #12 for violation of N.C. Gen. Stat. § 75-1.1 and the
punitive damages awarded under Issue #16(a) because both awards are
based upon the same conduct. We agree.
“Where the same source of conduct gives rise to a
traditionally recognized cause of action . . . and as well gives
rise to a cause of action for violation of G.S. 75-1.1, damages may
be recovered either for the [traditionally recognized cause of
action] or for violation of G.S. 75-1.1, but not for both.” United
Laboratories v. Kuykendall, 335 N.C. 183, 191-92, 437 S.E.2d 374,
379 (1993). One aspect of the doctrine of election of remedies is
that it prevents double redress for a single wrong. Id. at 192,
437 S.E.2d at 374. “Thus, a party may not recover punitive damages
for tortious conduct and treble damages for a violation of Chapter
75 based on that same conduct.” Id.
Plaintiffs' allegations against defendants included a claim of
constructive fraud and a claim of unfair and deceptive practices
under N.C. Gen. Stat. § 75-1.1. In order to establish a claim of
constructive fraud, plaintiffs had to establish “proof of
circumstances in which (1) the parties to a transaction [had] a
special confidential or fiduciary relationship, and (2) [the]
special relationship surrounded the consummation of the transaction
in which the defendant is alleged to have taken advantage of [the]
position of trust to the plaintiff's detriment.” Stephenson v.
Warren, 136 N.C. App. 768, 773, 525 S.E.2d 809, 812 (2000). Inorder to prevail on a claim of unfair and deceptive practices under
N.C. Gen. Stat. § 75-1.1, plaintiffs had to establish that “(1)
defendants committed an unfair or deceptive act or practice, (2) in
or affecting commerce and (3) plaintiff was injured as a result.”
Phelps-Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C.
App. 427, 439, 617 S.E.2d 664, 671 (2005).
In the case before us, the same conduct gave rise to
plaintiffs' claims of both constructive fraud and unfair and
deceptive practices. Defendant Burris, as plaintiffs' agent in
Oklahoma, was in a special fiduciary relationship with plaintiffs.
This relationship placed defendant Burris in a position to
negotiate the contract with Dynpar on behalf of plaintiffs.
However, he used his position to obtain the contract for the
benefit of his corporation, EWSI-OK, thereby taking advantage of
his position of trust with plaintiffs. Further, this same conduct
established defendant's unfair and deceptive practice in or
affecting commerce by using his position of trust to procure a
contract intended for plaintiffs. Plaintiffs were injured as a
result.
Plaintiffs argue that to prove punitive damages, a plaintiff
must prove an element of intentional conduct and because a claim
under § 75-1.1 does not require intentional conduct, the conduct
necessary to prove a claim under § 75-1.1 is different from conduct
that may necessitate a punitive damage award. We disagree.
Although § 75-1.1 may not require that a party intended its
actions to violate § 75-1.1, intentional conduct may constitute aviolation of § 75-1.1. This same intentional conduct may both
violate § 75-1.1 and be the basis for an award of punitive damages.
When the same conduct supports an award of treble damages based
upon a violation of G.S. § 75-1.1 as well as an award of punitive
damages, a plaintiff is required to elect between the two awards.
See United, 335 N.C. at 191-92, 437 S.E.2d at 379. The trial court
erred by awarding plaintiffs both treble damages and punitive
damages. We therefore remand to the trial court for entry of
judgment in accordance with this opinion.
II. Amended Judgment
Defendants next assign error to the trial court's inclusion of
damages awarded pursuant to issue #8 in the amended judgment when
those damages were not included in the original judgment. Issue #8
reads as follows:
8. What amount of money damages is the
plaintiff EWSI NC entitled to recover
from Defendants for wrongful use of the
name Environmental Water Solutions, Inc.?
Answer:$100,000.00
Defendants argue that the trial court's judgment exceeded the scope
of the mandate issued by this Court in Waldon I. We disagree.
“As a general rule, when an appellate court passes on
questions and remands the case for further proceedings to the trial
court, the questions therein actually presented and necessarily
involved in determining the case, and the decision on those
questions become the law of the case.” Creech v. Melnik, 147 N.C.
App. 471, 473, 556 S.E.2d 587, 589 (2001) (internal quotation
omitted). “However, the law of the case doctrine does not apply todicta, but only to points actually presented and necessary for the
determination of the case.” Id. at 474, 556 S.E.2d at 589.
In Waldon I, the question before this Court was whether the
damages awarded pursuant to issue #6 were awarded based on a
violation of § 75-1.1 and could be trebled under § 75-16. This
Court held that issue #6 was not awarded based upon a violation of
§ 75-1.1 and could not be trebled but that the damages awarded
pursuant to issue #12 were awarded for violation of § 75-1.1 and
were the damages to be trebled. The opinion in Waldon I
specifically addressed the issue of trebling the damages awarded
pursuant to issue #6 but not the damages awarded under issue #8.
The law of the case doctrine did not preclude the trial court from
considering the damages awarded pursuant to issue #8. See Creech,
147 N.C. App. 471, 556 S.E.2d 587 (holding that the law of the case
doctrine did not prevent the trial court from considering whether
the attorney could contract on behalf of the minor and whether the
contract was valid because the prior appeal addressed only whether
the summary judgment motion was properly granted). Thus, the trial
judge had the authority to enter a new judgment which included the
damages awarded under issue #8.
Remanded in part, affirmed in part.
Judges HUNTER and HUDSON concur.
The Judges participated in this decision and submitted this
opinion for filing prior to 1 January 2007.
Report per Rule 30(e).
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