Lead Opinion
Wilson Cycle Center, Inc. (Wilson Cycle), d/b/a Carolina Motorsports, and Carolina Motorsports of Wilson, Inc. (collectively, Defendants) appeal a judgment dated 27 September 1999 awarding damages to Lee Cycle Center, Inc., (Lee Cycle) d/b/a Wilson Cycle Center (WCC), and Lee Motor Company, Inc. (Lee Motor) (collectively, Plaintiffs).
Lee Cycle filed a complaint against Defendants alleging Defendants breached an October 1994 asset purchase agreement between Defendants and Lee Cycle (the agreement). Defendants filed an answer denying most of Lee Cycle’s allegations, however, admit- . ting it had entered into the agreement with Lee Cycle. On 19 March 1998, Lee Cycle filed a motion to amend its complaint to allow Lee Motor to intervene in the action. On 23 March 1998, Defendants filed a motion to dismiss Plaintiffs complaint pursuant to N.C. Gen. Stat. § 1A-1, Rules 12(b)(1) and 12(b)(6). The trial court, however, allowed Lee Cycle to amend its complaint and denied Defendants’ motions, allowing Defendants thirty days to file responsive pleadings. Lee Cycle amended its complaint adding Lee Motor as a plaintiff and further alleged: John F. Lee (Lee) is the president and sole shareholder of Plaintiffs; Lee signed the agreement and promissory note on behalf of Lee Cycle; and Lee Cycle performed all the obligations to Defendants and received all the benefits from Defendants.
In a non-jury trial, Plaintiffs presented evidence that in October 1994, Lee, on behalf of Lee Motor, entered into the agreement with Wilson Cycle. Lee testified the agreement was entered into on behalf of Lee Motor because Lee Cycle was not incorporated at the time of the agreement. The agreement provided Lee Motor would pay $187,500.00 “plus the cost of the new motorcycle[,] ATV[,] personal watercraft[,] Yamaha generator and lawnmower inventory” to Wilson Cycle for:
(a) The trade name, “Wilson Cycle Center” or any similar sounding derivative thereof; and
(b) All new motorcycles; “all terrain vehicles” (Hereinafter “ATVs”): personal watercraft; Yamaha generators and lawnmowers; all new accessories and parts, as defined herein; any noncur-rent parts and accessories, as defined herein (any used inventory is specifically excluded under this Agreement); and
(d) Any used motorcycles, personal watercraft, ATV[]s, new or used mopeds as agreed upon between the parties ....
Wilson Cycle further agreed that Wilson Cycle, along with M. Ellis and D. Ellis, would not
directly or indirectly own, manage, operate, control, be employed by or be connected with, in any manner, with any new motorcycle or new personal watercraft sales dealer within a thirty-five (35) mile radius of the present location of [Wilson Cycle’s] principal place of business for a period of five years.
The agreement also purported to “bind and inure to the benefit of the parties . . . and their respective heirs, successors and assigns.” The parties also included an attorney’s fees provision in the agreement obligating the breaching party pay “all costs, attorney[’]s[] fees or other expenses arising out of any suit or action brought to enforce any rights conferred” under the agreement.
In January 1995, the parties finalized the agreement. On behalf of Lee Cycle, Lee executed a check as down payment on the agreement in the amount of $80,290.73 and signed a promissory note (the promissory note) for the remaining debt owed on the agreement to be paid in sixty monthly installments beginning 20 February 1996. On 22 March 1995, Plaintiffs contacted Defendants concerning Defendants’ display of a sign with the name “Wilson Cycle Center” printed on it and a sign advertising Yamaha products for sale. After “several months” and “[sjeveral
In May 1995, Defendants contacted Plaintiffs about certain orders Defendants made prior to the agreement in which Defendants
had taken deposits on personal watercraft prior to receiving the personal watercraft from Sea-Doo. And, [Plaintiffs] made an agreement with [Defendants] (the verbal agreement), that [Defendants] could bring their customers that they had deposits from to [Plaintiffs’] store and [Plaintiffs] would deliver the units for them. But, [Defendants] would get the profits from the sale because [Defendants] had presold the units.
As it turned out, . . . [Defendants] would come and get the units without bringing the customers, and for whatever various reasons, the customer was never available to come get the personal watercraft when [Defendants] would come and get it. And, [Plaintiffs], in good faith, agreed to let [Defendants] carry the personal watercrafts [Defendants] had deposits on, assuming that [Defendants] were selling [the watercrafts] to the people that [Defendants] had told [Plaintiffs] [Defendants] had deposits from.
Plaintiffs were told a particular watercraft was being sold to Richard Hurst (Hurst), and in fact, the same watercraft, with the same vehicle identification number, was sold to Jerry Temple (Temple) in Wilson on 4 June 1995. Defendants sold the watercraft to Temple for $6,201.00 after Plaintiffs believed they were selling it to Hurst for $4,666.50. Defendants also continued to use the trade name “Wilson Cycle Center” on receipts, business envelopes, and billing statements as late as June 1995. On 7 August 1995, Defendants officially changed the corporate name of Wilson Cycle Center, Inc. to Carolina Motorsports of Wilson, Inc.
In or about March 1996, Defendants opened a Carolina Motorsports in Kinston, located outside the geographic boundary established in the agreement, selling new and used motorcycles, personal watercraft, ATVs, boats, and other recreational vehicles. Defendants, however, continued to advertise Carolina Motorsports in Wilson as buying and selling motorcycles, without making any distinction as to whether the motorcycles were new or used.
In February 1997, Plaintiffs hired Ed Stutzman (Stutzman) of Invisible Audit to make a purchase from Carolina Motorsports in Wilson. Stutzman went to Carolina Motorsports in Wilson, “less than two miles from [WCC].” Stutzman asked M. Ellis if Defendants had any “new Yamaha[]s for sale” and M. Ellis informed him that Defendants “had a new one in the back which was being sent to [their] Kinston store.” M. Ellis showed Stutzman a Yamaha Tlmberwolf all terrain vehicle and told Stutzman he was running a special on it for $3,750.00. Stutzman gave M. Ellis a deposit and M. Ellis informed Stutzman that he would have to deliver the vehicle to Stutzman in Greenville because Carolina Motorsports in Wilson had “sold out,” and, thus, “the paper work for the (new) Timberwolf would have to be written up at the Kinston store.” M. Ellis wrote Stutzman a receipt for the deposit and “proceeded to cross out the name, address and phone number at the top of the receipt which read[] ‘Wilson Cycle Center, Inc., P.O. Box 4445, 237-7076, Wilson, NC 27893’ with a permanent black marker.” M. Ellis “then stamped in red ink ‘Carolina Motorsports’ under the name, address and phone number he had crossed out. He then wrote Kinston in black ink to the right of the Carolina Motorsports stamp.” Later that day, Stutzman went back to Carolina Motorsports in Wilson and paid the rest of the purchase price for the Timberwolf. M. Ellis wrote Stutzman a receipt and again marked through the business name, address, and telephone number and wrote in “Carolina Motorsports Kinston, NC.” M. Ellis, however, told Stutzman he could not take delivery of the vehicle at the Wilson store and instead allowed Stutzman to take delivery of the Timberwolf 17.4 miles from Carolina Motorsports in Wilson. A week later, Stutzman received an invoice and training certificate from Defendants’ Kinston store.
At the close of Plaintiffs’ evidence and the close of all the evidence, Defendants renewed their 12(b)(6) motion alleging Plaintiffs failed to state a cause of action based on a lack of
that Plaintiff Lee Motor . . . entered into the Purchase Agreement with [WCC] . . . ; that. . . Lee Cycle . . . was and is the beneficiary and Obligor of the Promissory Note supporting [the] [agreement....
. . . [I]n addition to the . . . [agreement, the parties entered into [the] verbal agreement whereby Plaintiff[s] [were] to deliver to Defendants] certain pre-sold Sea Doo personal water craft to allow Defendants] to consúmate said sales and Plaintiff[s] did in fact deliver to Defendants] a 1995 Sea Doo bearing serial number ZZNA4015L495 on or about May 6, 1995, for sale to . . . Hurst; but that. Defendants], instead sold said vehicle to . . . Temple on or about June 4, 1995, at a profit of $1,000.00; and that
Fifth, Defendants have further breached the . . . agreement with Plaintiffs as follows:
(a) Defendants continue to use the name “Wilson Cycle Center”;
(b) Defendants competed with Plaintiff[s] in violation of the covenant not to compete, particularly maintaining a business within thirty-five (35) miles of Defendants location on Highway 301 North of Wilson, North Carolina, which was, for all intents and purposes an extension of the Kinston location of the business ....
(1) New parts were kept and sold in the Wilson store;
(2) A new motorcycle (Big Dog) was delivered to the Wilson store and kept on premises;
(3) Other Yamaha products (ATV[s]) were sold from the Wilson location;
(4) Radio and newspaper ads advertise the Wilson store;
(5) Both the Kinston and Wilson locations were operated under the same corporate name; and that
Sixth, [the trial court] finds a[s] fact that ATV[]s are not included] within the definition of “motorcycle[,]”[] and the only advertising which violated the agreement between the parties [were] ads in the Wilson market which advertised the Wilson store as a sight for sales of either new product or ads which did not designate whether product was new or used ....
The trial court concluded as a matter of law that Defendants had breached the agreement with Plaintiffs and awarded Plaintiffs $10.00 as damages and $22,575.00 for attorney’s fees for breach of the agreement. The trial court also concluded Defendants breached the verbal agreement and awarded Plaintiffs $1,000.00 as compensatory damages for breach of the verbal agreement. Defendants moved for a judgment notwithstanding the verdict and for a new trial. The trial court, however, denied Defendants’ motions.
The issues are whether: (I) the trial court abused its discretion in permitting Lee Cycle to amend its complaint; (II) the trial court erred by concluding Defendants breached the agreement; (III) the trial court erred in denying Defendants’ motion for judgment notwithstanding the verdict; (IV) the trial court erred in denying Defendants’ motion for a new trial; and (V) there was a statutory basis for the trial court’s award of attorney’s fees to Plaintiffs.
I
Defendants argue the trial court erred in allowing Lee Cycle to amend its complaint to include Lee Motor as a plaintiff. In support of this argument, Defendants contend: (A) Lee Cycle’s failure to initially name Lee Motor as a plaintiff resulted in the lack of subject matter jurisdiction and (B) Lee Cycle was not permitted to bring a breach of contract action because Lee Cycle was not in
A
Subject matter jurisdiction
This Court has held that a plaintiff’s failure to join a party does not result in “a lack of jurisdiction over the subject matter of the proceeding.” Stancil v. Bruce Stancil Refrigeration, Inc.,
B
Privity of contract
To withstand a motion to dismiss for failure to state a claim in a breach of contract action, a plaintiff’s allegations must either show it was in privity of contract, or it is a direct beneficiary of the contract. See Chandler v. Jones,
In this case, viewing Plaintiffs’ allegations in the light most favorable to Plaintiffs, see Ford v. Peaches Entertainment Corp.,
II
Defendants argue the trial court’s findings of fact are not supported by the evidence and do not support the conclusions of law that Defendants breached the agreement and damaged Plaintiffs. We disagree.
Appellate review of findings of fact “made by a trial judge, without a jury, is limited to . . . whether there is competent evidence to support the findings of fact.” Starco, Inc. v. AMG Bonding and Ins. Services,
Ill
Defendants next argue the trial court erred in denying Defendants’ motion for judgment notwithstanding the verdict. We disagree.
In order to prevail on a claim for breach of contract, a plaintiff’s evidence must show a valid contract existed between the parties, the defendant breached the terms of the contract, the facts constituting the breach, and damages resulted from the breach. Claggett v. Wake Forest University,
In this case, viewing the evidence in the light most favorable to Plaintiffs, see Smith v. Price,
IV
Defendants next argue the trial court erred in denying their motion for a new trial. We disagree. The trial court’s ruling on a motion for a new trial is within the trial court’s sound discretion and will not be reversed on appeal absent a showing that errors of law occurred at trial or the trial court’s ruling amounted to a substantial miscarriage of justice. Allen v. Beddingfield,
V
Defendants finally argue the trial court erred in awarding Plaintiffs attorney’s fees without a statutory basis for such an award. We agree.
Plaintiffs first contend N.C. Gen. Stat. § 6-21.2 provides the statutory basis for the trial court’s award of attorney’s fees. We disagree. This section provides:
Obligations to pay attorney[’]s[] fees upon any note, conditional sale contract or other evidence of indebtedness . . . shall be valid and enforceable, and collectible as part of such debt, if such note, contract or other evidence of indebtedness be collected . . . after maturity....
N.C.G.S. § 6-21.2 (1999). Thus, section 6-21.2 allows (1) the party owed the debt (2) to recover attorney’s fees (3) after the debt has matured (4) provided it is written in the note, conditional sale contract, or other evidence of indebtedness. N.C.G.S. § 6-21.2; see First Citizens Bank & Tr. Co. v. 4325 Park Rd. Assocs., Ltd.,
In this case, the parties owed the debt, Defendants, are not seeking to recover attorney’s fees. In any event, the debt has not matured. Accordingly, section 6-21.2 cannot form the statutory basis to award Plaintiffs attorney’s fees, thus, the trial court erred in awarding Plaintiffs attorney’s fees.
Plaintiffs alternatively contend that N.C. Gen. Stat. § 6-20 provides the statutory basis for the attorney’s fees award. We disagree. Section 6-20 provides for the trial court to allow “costs” in its discretion. N.C.G.S. § 6-20 (1999). Assessable costs in civil cases are limited to those items listed in section 7A-305. Sara Lee Corp. v. Carter,
Affirmed in part, and reversed in part.
Notes
. We note Plaintiffs also filed suit against Mark L. Ellis (M. Ellis) and Daniel Ellis (D. Ellis), individually, however, the trial court dismissed Plaintiffs’ action as to M. Ellis and D. Ellis.
. Our Supreme Court has carved out an exception to this general rule, permitting the enforcement of attorney’s fees provisions contained in separation agreements. Bromhal v. Stott,
Concurrence Opinion
concurring in part, dissenting in part.
I concur in parts I through IV of the majority’s opinion. I disagree with the majority’s conclusion that plaintiffs are not entitled to recover attorney’s fees under either G.S. § 6-21.2 or G.S. § 6-20. Accordingly, I
As the majority’s opinion notes, G.S. § 6-21.2 provides:
Obligations to pay attorneys’ fees upon any note, conditional sale contract or other evidence of indebtedness . . . shall be valid and enforceable, and collectible as part of such debt, if such note, contract or other evidence of indebtedness be collected . . . after maturity....
N.C. Gen. Stat. § 6-21.2 (1999) (emphasis supplied). The majority’s opinion concludes that G.S. § 6-21.2 does not provide statutory authority for plaintiffs to recover attorney’s fees because “the party owed the debt, Defendant, is not seeking to recover attorney’s fees.” I disagree with this analysis.
The phrase “other evidence of indebtedness” contained in G.S. § 6-21.2 has been defined by our Supreme Court to include “any printed or written instrument, signed or otherwise executed by the obligor(s), which evidences on its face a legally enforceable obligation to pay money.” Stillwell Enterprises, Inc. v. Interstate Equipment Co.,
In Stillwell, the Supreme Court reversed this Court’s holding that G.S. § 6-21.2 was inapplicable, and that an award of attorney’s fees arising out of a lease dispute was improper. Id. at 295,
This Court has also held that “evidence of indebtedness” under G.S. § 6-21.2 applies to a stock purchase agreement. Nucor Corp. v. General Bearing Corp.,
Paragraph 13 of the Asset Purchase Agreement (“Agreement”) in this case expressly requires the parties to indemnify each other “for any damages incurred ... as a result of the breach of any warranty .. . including all costs, attorneys’ fees or other expenses arising out, of anv suit or action brought, to enforce anv rights conferred hereunder.” (emphasis supplied). Paragraph 13 of the Agreement further provides:
In the event of any violation by the Seller of any representations and/or warranties set forth herein, including but not limited to the provisions of Paragraph 11 hereof [“Covenant Not to Compete”], then Purchaser shall have the right, to offset anv payments that mav be due the Seller pursuant to the provisions hereof in the amount bv which Purchaser has been damaged bv any such breach.
(emphasis supplied).
The $1,010.00 awarded plaintiffs by the trial court is “evidence of indebtedness.” The Agreement provided for payments over and above the promissory note. Paragraph 13 of the Agreement also provides plaintiffs the right to offset the amount owed under the agreement by the $1,010.00 awarded. Plaintiffs sought such an offset and cancellation of the outstanding notes in their complaint. Plaintiffs are creditors of defendants on a “matured” debt. Thus, consistent with the Supreme Court’s holding in Stillwell, G.S. § 6-21.2 provides authority for plaintiffs to recover the attorney’s fees “upon collection of the debts arising from the contract
The trial court’s award of attorney’s fees is also authorized by G.S. § 6-20. G.S. § 6-20 provides that, “[i]n other actions, costs may be allowed or not, in the discretion of the court, unless otherwise provided by law.” N.C. Gen. Stat. § 6-20 (1999). A trial court may, in its discretion, award attorney’s fees under G.S. § 6-20 if “just and equitable.” Batcheldor v. Boyd,
In suits in equity, the allowance of costs rests in the discretion of the court. Worthy v. Brower,
In this case, plaintiffs sought the equitable remedies of (1) cancellation of the Agreement, (2) prohibiting defendants from collecting any sums due under the Agreement, and (3) returning to plaintiffs any monies paid under the Agreement. The trial court ordered that defendants be “restrained from any further violations of the Agreement.” This remedy is equitable in nature. Thus, under G.S. § 6-20, the trial court had discretion to award plaintiffs costs, in-eluding attorney’s fees. Defendants present no evidence of an abuse of discretion in the trial court’s award. I would affirm the trial court’s award of attorney’s fees under either G.S. § 6-21.2 or G.S. § 6-20. I, therefore, respectfully dissent from part V of the majority’s opinion.