Collins v. Summers Hardware and Supply Co.

• Citation: 88 S.W.3d 192
• Parties: James A. COLLINS, et al., v. SUMMERS HARDWARE AND SUPPLY COMPANY.
• Decision Date: 27 March 2002
• Court: Tennessee Court of Appeals

88 S.W.3d 192

James A. COLLINS, et al., v. SUMMERS HARDWARE AND SUPPLY COMPANY.

Court of Appeals of Tennessee, Eastern Section, at Knoxville.

March 27, 2002.

Permission to Appeal Denied by Supreme Court October 7, 2002.

COPYRIGHT MATERIAL OMITTED

Rick J. Bearfield, Johnson City, Tennessee, for appellant, Summers Hardware and Supply Company.

Mark M. Lawson, Bristol, Virginia, for appellees, James A. Collins and Gary Smith.

OPINION

HOUSTON M. GODDARD, P.J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, J., joined. D. MICHAEL SWINEY, J., not participating.

This is a suit by Plaintiffs James A. Collins and Gary Smith seeking damages from their former employer, Summers Hardware and Supply Company, in connection with their employment. The Plaintiffs contend that Summers Hardware made certain deductions from their pay which were contrary to their employment contract. Summers Hardware asserts otherwise. A jury found this issue in favor of the Plaintiffs and assessed damages, which the Trial Court, on motion of the Plaintiffs, altered upward. Summers Hardware appeals questioning whether the statute of limitations has run as to Mr. Collins' suit and whether both parties were estopped to press the claim or had waived their right to assert it. Summers Hardware also contends the Trial Court was in error in increasing the jury award without giving them the option of receiving a new trial. We affirm.

James A. Collins and Gary Smith, former employees-at-will of Summers Hardware and Supply Company sue the Company for commissions they contend they were entitled to, which were not paid. A jury returned a verdict finding that their insistence was correct and awarded Mr. Collins $7500 and Mr. Smith $13,000.

The Trial Court overruled Summers Hardware's motion to alter or amend or for a new trial, except $387.94. contended to be owed Summers Hardware by Mr. Smith. The Plaintiffs likewise filed a motion to alter or amend and the Trial Court increased Mr. Collins' award to $15,087.21 and Mr. Smith's to $25,793.36.

Summers Hardware appeals, raising a number of issues which we will summarize and re-state as follows:

1. The Trial Court should have found that the employment contract with Mr. Smith¹ was divisible or severable, resulting in the statute of limitations beginning to run upon his receiving his first pay check, which was more than six years prior to October 20, 1999, the date this suit was filed.²

2. The Trial Court should have directed a verdict on Summers Hardware's defense of estoppel and should not have submitted that issue to the jury.

3. The jury was in error in finding the Plaintiffs had not waived their rights to assert their claims for breach of contract.

4. The Trial Court erred in altering the judgment, which in effect was an additur without granting Summers Hardware the right to refuse the additur and be granted a new trial.

Mr. Smith was employed by Summers Hardware from September 8, 1992, to June 25, 1999, and Mr. Collins from March 14, 1994, to March 10, 1999.

It was the Plaintiffs' theory that they were employed as at-will commission salesmen, and the compensation agreed upon was a flat commission of 22.5 percent of the difference between the sales price to customers and cost of the goods to Summers Hardware.

It was Summers Hardware's theory that the agreement was that they should receive the 22.5 percent heretofore referenced, less deductions for medical insurance and Summers Hardware's share of Social Security.

Although the check stubs the Plaintiffs received had standard deductions, such as the employees' portion of Social Security provisions and withholding tax, it did not disclose any deduction for the employer's share of Social Security or for health insurance.

While it is true, as argued by Summers Hardware, that both Plaintiffs knew after the first few pay checks that the amount received in their monthly payments was, as Mr. Smith put it, "a little bit shy," we do not believe this knowledge was sufficient to trigger the running of the statute of limitations. We say this because there is proof in the record which the jury could have and, under the verdict, most likely did believe that the officials of Summers Hardware deceived the Plaintiffs by contending the deductions made were for "telephone costs, paper work, etc." There is also proof that Summers Hardware refused to show the Plaintiffs the commission reports, which disclosed the deductions in question. These were kept in a vault and according to the pay master were not to be shown to the employees absent authorization by Summers Hardware. There is also proof that when inquiry was made one of the officers told them that "I will get back to you," but he never did.

Finally and perhaps the most damning proof insofar as Summers Hardware's defense is concerned, the handbook given to both employees specifically provided the following:

EMPLOYEE BENEFITS

. . . .

HEALTH INSURANCE

The company provides group health insurance which is underwritten by a national carrier, Charter Benefits. After 90 days of employment you become eligible. At that time you will be given the opportunity to accept the insurance coverage. The insurance company provides a booklet explaining the various benefits, a copy of which will be given to you when you join the program.

The company pays all the premiums of the employee. (Emphasis supplied.)

Summers Hardware also pleaded as to Mr. Smith that his claim, was barred by the applicable six-year statute of limitations and, in addition, that they both had waived their right to assert their claim or estopped to do so.

At the close of the trial the jury returned a special verdict as follows:

                                                         VERDICT
                Under the terms of the contract that the jury finds existed between the parties, the jury
                reports as follows
                                                         COLLINS
                1.  Did Collins by his conduct knowingly and intentionally waive any breach of contract by
                Summers
                           Yes ___         No  √ 
                If no, proceed to Question 2
                2.  Did the parties agree that collins would receive as his gross pay 22.5% of Summers'
                gross profit reduced by Summers' cost of social security and health insurance
                           Yes ___         No  √ 
                     If you answered "Yes", then answer Question 3.13. ONLY. If you answer "No", then
                proceed to Question Nos. 3A. and 3B)
                3.  Based upon your finding in Question NO. 2
                     A.  Summers owes Collins for unpaid commission at 22.5%   $7500.00
                                                                               --------
                     B.  Summers owes Collins for unpaid commission at 16.5%   $  0
                                                                               --------
                     TOTAL OWED TO COLLINS                                     $7500
                                                                               --------
                                                       SMITH
                1.  Did Smith by his conduct knowingly and intentionally waive any breach of contract by
                Summers
                           Yes ___         No  √ 
                If no, proceed to Question 2
                2.  Did the parties agree that Smith would receive as his gross pay 22.5% of Summers'
                gross profit reduced by Summers' cost of social security and health insurance?
                           Yes ___         No  √ 
                     If you answered "Yes", then Smith cannot recover. Proceed to the next section. If
                you answer "No", then proceed to Question No. 3.
                     3.  Based upon your finding in Question No. 2:
                     Summers owes Smith for unpaid commission at 22.5% from
                October 20, 1993 (but not prior to that time)                  $13,000
                

                                                                               -------
                     TOTAL OWED TO SMITH                                       $13,000
                                                                               -------
                                                       SUMMERS
                1.  Does Smith owe Summers on Smith's customer accommodation charge account?
                           Yes ___         No  √ 
                2.  If yes, how much does Smith owe Summers:                   $0.00
                                                                               --------
                                                /s/   (Not Legible)    
                                                    FOREPERSON
                    DATE 11/10/00
                

Under Tennessee law it is clear that the statute of limitations begins running as to a contract when the cause of action accrues. It is also clear that as to entire contracts, as distinguished from severable contracts, a single cause of action arises upon a breach occurring. As to severable contracts, however, breaches give rise to separate causes of action which may accrue at different times. Both points are articulated in the case of Greene v. THGC, Inc., 915 S.W.2d 809 (Tenn.Ct. App.1995).

What is not clear is which contracts are entire and which are severable.

A number of cases have addressed the question, which we will now detail:

Barnes, et al. v. Black Diamond Coal Co., 101 Tenn. 354, 47 S.W. 498 (Tenn.1898)

In this case, which is the oldest one to which we have been cited, the plaintiff was seeking rents claimed to be owed under a lease which was for one year at a rental of $30 per month. A previous suit had been filed as to rent earlier due but not paid, which was pleaded by the defendant as a bar to the present suit under the theory of res judicata. In addressing the question our Supreme Court found the contract was severable and stated the following (at page 498):

It is next said the matter is res judicata. It appears that, previous to the present suit, complainants brought an action for the rents of December, 1895, and January and February, 1896, and recovered $90, or at the rate of $30 per month for the three months. The rents previous to December, 1895, were paid. It is insisted this is a bar to any further action for the breach of this contract. The argument is that the contract is entire for the term, even although the rental is so much per month, and, being an entire contract, there can be but one breach and...