Opinion

Next Generation, Inc. v. Wal-Mart

Court
Court of Appeals of Tennessee
Filed
Oct 12, 2000
Status
Published
On the bench
Presiding Judge Herschel P. Franks
Cited by
0 cases
Authority
More cited than 30.0%

The opinion

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

October 12, 2000 Session

NEXT GENERATION, INC., v. WAL-MART, INC., d/b/a SAM’S

WHOLESALE CLUB

Direct Appeal from the Circuit Court for Davidson County

No. 96C-1068 Hon. Thomas W. Brothers, Circuit Judge

No. M2000-00114-COA-R3-CV - Filed December 21, 2000

In this contract dispute, the jury awarded damages to Wal-Mart, Inc., and the Trial Court concurred.

Next Generation, Inc., appealed raising issues as to the admissibility of evidence and the Trial

Court’s instructions to the jury. We affirm.

Tenn. R. App. P.3 Appeal as of Right; Judgment of the Circuit Court Affirmed.

HERSCHEL PICKENS FRANKS , J., delivered the opinion of the court, in which CHARLES D. SUSANO,

JR., J., and D. MICHAEL SWINEY, J., joined.

William L. Brown and James T. Williams, Chattanooga, Tennessee, for Appellant, Next Generation,

Inc.

Thomas Pinckney, Andy Rowlett, and Keith Quinn, Nashville, Tennessee, for Appellee, Wal-Mart

Stores, Inc., d/b/a Sam’s Wholesale Club.

OPINION

In this breach of contract action involving an agreement to purchase 2000 units of a

sporting clay machine between Next Generation, Inc., (“Next”), and Wal-Mart, Inc. d/b/a/ Sam’s

Wholesale Club (“Sam’s”), a jury awarded Sam’s $1,084,000.00 and Next has appealed. Next raised

the following issues:

1. Whether the Trial Court committed error regarding the parol evidence rule?

2. Whether the Trial Court’s supplemental instructions following the jury’s

questions were erroneous?

3. Whether the Trial Court erred in failing to direct a verdict for Next regarding

Sam’s claim that Next breached an agreement to market the product?

4. Whether the Trial Court erred in failing to direct a verdict for Next regarding

Sam’s claim that Next breached the implied warranty of merchantability?

5. Whether the Trial Court erred in failing to direct a verdict for Next regarding

Sam’s claim that Next agreed to reimburse Sam’s for units that did not sell?

6. Whether the jury charge of the Trial Court violated the statute of frauds?

7. Whether the Trial Court erred in granting Sam’s a directed verdict on Next’s

claim of promissory fraud and punitive damages?

We review judgments based upon a jury verdict and approved by the Trial Judge by

determining whether there is any material evidence to support the verdict. Tenn. R. App. P. 13(d).

In determining whether there is material evidence to support the verdict, we must take the strongest

legitimate view of the evidence in favor of the verdict, assume the truth of all evidence that supports

the verdict, and allow all reasonable inferences to sustain the verdict, discarding all countervailing

evidence. Barnes v. Goodyear Tire and Rubber Co., 2000 WL 688864 (Tenn. 2000). If the record

contains any material evidence to support the jury’s verdict, the judgment must be affirmed.

Crabtree Masonry Co. v. C & R Constr., Inc., 575 S.W.2d 4, 5 (Tenn. 1978).

The agreement between the parties was entered in Arkansas, but Tennessee and

Arkansas have the same version of the parol evidence rule, which basically states that a writing

intended by the parties as the final expression of their agreement may not be contradicted by

evidence of a prior or contemporaneous oral agreement, but may be explained or supplemented by

consistent additional terms. See Tenn. Code Ann. §47-2-202 and Ark. Code Ann. §4-2-202.

Similar to Arkansas, Tennessee law provides that a contract which is unambiguous

on its face is considered final and may not be contradicted with parol evidence. City of Memphis for

Use and Benefit of State v. Moore, 818 S.W.2d 13 (Tenn. Ct. App. 1991). Likewise, where the

written document contains a clause stating that no other agreements exist other than the ones

contained therein, it is final and cannot be varied by parol evidence. Tidwell v. Morgan Building

Systems, Inc., 840 S.W.2d 373 (Tenn. Ct. App. 1992.)

In this case, the written documents upon which Next relies are a “commitment” letter

written by Dean Sanders, president of Sam’s, which states that Sam’s will purchase 2000 units from

Next before the end of fiscal year 1994, and the vendor agreement signed by Next. It is clear not

only from the testimony, but also from the documents, that neither was intended by the parties to be

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a “final expression of their agreement” as contemplated by the parol evidence rule. The commitment

letter, as testified to by Sanders and by Ray Murski, the sales representative for Next, was written

to enable Next to obtain financing for production, and was clearly not intended to be a final

expression of the agreement, as it is only a one-line document signed by one party. The commitment

letter contains no terms regarding payment, form of delivery, dates of delivery, and numerous other

essential items.

The vendor agreement was a document that Sam’s required its vendors to complete

and have on file, but it does not speak to such significant terms as price, quantity, delivery, payment,

etc. It is also deficient so far as detailing the actual substance of the parties’ deal, and clearly was

not intended as the final expression. Both the commitment letter and the vendor agreement are either

ambiguous or silent as to many essential terms, and neither contains an integration clause. The

evidence establishes that these two documents were not the final expression of the parties agreement.

Since the writings were not final expressions, and the oral terms regarding marketing

were not contradictory of the writings, there is no parol evidence issue. There was material evidence

regarding the oral terms of the parties’ agreement to support the jury’s finding that Next had

obligations under the contract which were breached, and thus the jury’s finding in this regard is

supported by material evidence.

Next argues that the Trial Court’s supplemental instructions to the jury following the

jury’s submission of questions were erroneous, and that Next’s proposed instruction should have

been given. The Trial Court’s instructions basically stated that a contract can be oral or written or

both, and that the existence of a contract must be proven by a preponderance of the evidence.1 This

instruction is a correct statement of the law, and is applicable to the facts and issues in the case and

is therefore not erroneous. Ladd by Ladd v. Honda Motor Co., Ltd., 939 S.W.2d 83 (Tenn. Ct. App.

1996).

Next requested an instruction which stated that oral terms inconsistent with the

written document should not be considered. Since none of the oral terms described by the parties

were inconsistent with written documents, the Trial Court correctly refused the instruction.

Likewise, Next’s proposed instruction that any change to the written document would

have to be in writing was not appropriate. Written contracts may be supplemented by oral terms

when the written document is not a final expression of the agreement, and when the oral terms are

not inconsistent. The instruction was not supported by the law or the evidence and was properly

denied.

Next argues that it was entitled to a directed verdict. This issue hinges on the

1

The jury had asked if they were to give equal weight to oral and written agreements and

whether a written document would supercede an oral agreement?

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question of whether there was evidence in the record to support the conclusion that Next agreed to

undertake responsibilities with regard to the marketing of the product. Dean Sanders and Ray

Murski testified unequivocally that LeAnna and Moore for the plaintiff Next had agreed from the

beginning to run ads, do demonstrations, go to shows and shoots, etc., in order to create a demand

for the product. LeAnna and Moore also testified that they agreed to do these things, but that their

agreement came after the units had been shipped and were not selling. Thus, the evidence is

undisputed that the agreement existed, the only dispute regarding the agreement was when the

agreement was made and the extent to which they committed themselves. There is also evidence that

Next had not fulfilled its agreement with regard to marketing. Murski, as an agent for Next,

identified many things which Moore and LeAnna had committed themselves to do that had not been

completed. Moore and LeAnna admitted that they had not done all of the things which were

described in Murski’s communications with Sam’s. Sanders also testified that Next had failed in

its marketing responsibilities. There was evidence in the record that an agreement to promote

existed, and that it had not been satisfied by Next. Accordingly, a directed verdict was inappropriate.

As to the denial of a directed verdict regarding Next’s breach of warranty of

merchantability, Sam’s made the claim in its pleadings, but admits that the issue is now moot

because counsel for Sam’s did not raise the issue in closing arguments. Next explains that they have

preserved the issue out of an abundance of caution, and we conclude there is no need to address the

issue.

Next also complains about the refusal to direct a verdict on the issue of breach of

agreement to reimburse. While there is no express agreement in the record that Next agreed to

reimburse Sam’s for the units picked up, the alleged agreement to reimburse was not the only basis

for awarding damages to Sam’s. There was ample evidence in the record to establish that Next had

promised to undertake certain marketing responsibilities as a part of this agreement, and that Next

breached this portion of the contract. Sam’s had ordered and paid for nearly 200 units that it could

not sell, and those units were ultimately returned to Next. Sam’s expended over a million dollars

for these units that did not sell and Next ultimately resold the units after regaining possession. The

jury could reasonably conclude Sam’s was entitled to a refund of the money paid for those units as

compensatory damages, to compensate Sam’s for Next’s breach. See Wilson v. Dealy, 434 S.W.2d

835 (Tenn. 1968); Nashland Associates v. Shumate, 730 S.W.2d 332 (Tenn. Ct. App. 1987).

Moreover, “the amount of damages is primarily a jury question, and a verdict approved by the trial

court is entitled to great weight in this court.” Act-O-Lane Gas Service Co. v. Hall, 248 S.W.2d 398

(Tenn. Ct. App. 1951).

Next argues that the Trial Court’s instructions to the jury were erroneous because (1)

they allowed the jury to consider evidence of an alleged oral contract to reimburse in violation of the

statute of frauds, and (2) they erroneously stated that the burden of proof for such a contract was a

preponderance of the evidence, rather than the clear and convincing standard required under the

Arkansas statute of frauds. Next places great emphasis on this alleged oral agreement to reimburse.

It was not significant to the outcome of the case. The jury’s verdict was supported by material

evidence that Next had an obligation to market the product and failed to do so, and the verdict may

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be upheld on this basis alone. Benson v. Tennessee Valley Elec. Co-op., 868 S.W.2d 630 (Tenn. Ct.

App. 1993). Error, if any in this regard, was harmless. Tenn. R. App. P. 36(b).

Next argues that the Trial Court erred in granting Sam’s a directed verdict on Next’s

claims of promissory fraud and punitive damages. We conclude the Trial Court properly directed

verdicts on these issues. The Trial Court found that reasonable minds could not differ as to the lack

of fraud, because there was no proof of present intent to willfully injure through false promise, as

is required by Arkansas law. Next admits that this is a proper statement of Arkansas law, but argues

that Sam’s committed to purchase 2000 units when they only intended to purchase 200, and that such

constitutes promissory fraud. The testimony from which this can be deduced, however, is that of

Ray Murski, who was an agent of Next. Murski testified that Sam’s would try 200 units or so and

see how they sold, and that if they sold well Sam’s would purchase 2000 or more. Sanders testified

that he fully intended to purchase 2000 units or more, but that the units did not sell because Next

breached its promise to promote the product. Since Murski was agent for Next, his knowledge is

imputed to Next and would have been known by Next and could not form a basis for promissory

fraud. See City Nat. Bank of Fort Smith, Ark. v. Vanderboom, 290 F. Supp. 592 (W.D. Ark. 1968).

Likewise, in the absence of fraud, there is no basis for punitive damages, and thus the

Trial Court properly directed a verdict on this issue as well. See Ray Dodge, Inc., v. Moore, 479

S.W.2d 518 (Ark. 1972); Hodges v. S.C.Toof & Co., 833 S.W.2d 896 (Tenn. 1992).

Finally, Next argues that the Trial Court erred in granting Sam’s a directed verdict

on its claim for prejudgment interest. Utilizing the proper standard of review, the Trial Court

properly granted a directed verdict on this issue. Prejudgment interest is allowed to compensate for

damages wrongfully withheld from the time of loss until judgment, and is not allowed where the loss

is not “immediately ascertainable with reasonable certainty.” TB of Blythesville, Inc. v. Little Rock

Sign & Emblem, Inc., 946 S.W.2d 930 (Ark. 1997); Brandt v. Bib Enterprises, Ltd., 986 S.W.2d 586

(Tenn. Ct. App. 1998).

We conclude that the jury verdict was supported by ample material evidence and we

affirm the judgment of the Trial Court and remand with the cost of the appeal assessed to Next

Generation, Inc.

_________________________

HERSCHEL PICKENS FRANKS , J.

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.

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