Gadsden Paper and Supply Co., Inc. v. Washburn

• Decision Date: 29 September 1989
• Citation: 554 So.2d 983
• Parties: GADSDEN PAPER AND SUPPLY COMPANY, INC. v. Bobby Joe WASHBURN. 88-342.
• Court: Alabama Supreme Court

Page 983

554 So.2d 983

GADSDEN PAPER AND SUPPLY COMPANY, INC. v. Bobby Joe WASHBURN.

88-342.

Supreme Court of Alabama.

Sept. 29, 1989.

Rehearing Denied Dec. 8, 1989.

Walter J. Sears III and David G. Hymer of Bradley, Arant, Rose & White, Birmingham, and Curtis Wright of Dortch, Wright & Russell, Gadsden, for appellant.

John T. Robertson IV of Henslee, Bradley & Robertson, Gadsden, for appellee.

HORNSBY, Chief Justice.

The defendant, Gadsden Paper Company, challenges certain rulings of the trial court which, it argues, led to a jury verdict and judgment for the plaintiff. The plaintiff stated two counts in his complaint; one for breach of contract and the other for fraud. The jury found against the plaintiff on the breach of contract count but found for the plaintiff on the fraud count and assessed damages against the defendant of $250,000.

The facts supportive of plaintiff, Bobby Joe Washburn's case indicate that Gadsden Paper Company (hereinafter GAPCo) and Washburn entered into negotiations for the purchase of Washburn's business by GAPCo. Washburn had operated the Gadsden Solvent and Supply Corporation as his own business. Negotiations began in early 1984, with GAPCo being represented by Charles Shelby, its general manager. There were several meetings between Shelby and Washburn concerning a possible sale.

On at least one occasion, Washburn and Shelby met with George Cooper, Washburn's accountant. Cooper testified that the negotiations between Shelby and Washburn concerned a sale of the business and not a mere employment agreement. The parties, along with Cooper, allegedly discussed the purchase of such items as good will, accounts receivable, and inventory. Cooper's testimony indicates that Shelby told both Cooper and Washburn that the purchase price would be negotiable. Further testimony indicates that Shelby told both Cooper and Washburn that the purchase price would be paid over two years. Furthermore, he allegedly wanted to work out a deal where Washburn would go to work for GAPCo and would receive compensation in the form of a commission over a period of two years equal to the agreed purchase price.

Cooper was asked at trial if the payment was intended as salary to Washburn for his work as a GAPCo salesman. Cooper testified that Washburn was to receive $72,000 over a period of two years as a part of the sale of the business accounts of Gadsden Solvent. Cooper finally stated that the $72,000 was intended to compensate Washburn for accounts receivable, inventory, and good will.

Washburn and Shelby also met with Bob Lynn, Shelby's superior, and with various customers of Washburn's company, including Jimmy Hill of Goodyear, Faye Chamblee of Mid-South Electronics, and George Cooper, who helped to provide Washburn and Shelby with information as to the value of Washburn's business. There was evidence that, on at least one occasion, Shelby, in the presence of Washburn, inquired of Faye Chamblee and Jimmy Hill whether the business that was being done with Washburn would be given to GAPCo if a sale of the business was consummated. An attempt to formalize the parties' agreement was not made until June 19, 1984, at which time GAPCo gave to Washburn a writing in the form of a letter, which GAPCo now claims to be the final agreement. Washburn contests this characterization of the letter.

That letter is set out in substantial part below:

"Dear Bobby:

"This is to relate in writing the things we discussed and agreed upon related to your becoming an employee of Gadsden Paper & Supply Company.

"(1) You shall cease to operate your business known as Gadsden Solvent & Supply Corporation as of June 25, 1984. You shall, on that date take a physical inventory and sell that inventory to Gadsden Paper & Supply Company at the price you originally paid for the merchandise. Any of this merchandise which has not been sold within six (6) months shall be sold back to you at the same price.

"(2) You shall become a sales representative of Gadsden Paper & Supply Company as of June 25, 1984 subject to the same conditions, rules, benefits, etc. as our other sales representatives. You shall be assigned the same customers and business which you are presently selling and shall retain these accounts so long as reasonable effort is made on your part. It is our intention that you grow with us in sales, that you be assigned as many additional accounts as possible without conflicting with present account assignments. It is also our intention that you emphasize the sale of solvents and gloves to enable us to grow in that area. You shall be compensated using the same commission formula applicable to our other sales personnel. During the first two years beginning June 25, 1984 assuming continued employment, you will receive at the end of each accounting period the commission earned for the period or $2000.00, whichever is greater. At the end of each of the first two years, if you have been paid less than $36,000.00 (gross earnings) you shall be paid the difference between $36,000.00 (gross) and what you were actually paid during the year.

"(3) You do hereby agree not to sell other than as an employee of Gadsden Paper & Supply Company, any of the products which we normally market within a 60 mile radius of Gadsden, Alabama during the period of June 25, 1984 and June 25, 1986.

"/s/ W. Charles Shelby

"W. Charles Shelby

"General Manager

"DATE: June 20, 1984

"SIGNATURE OF AGREEMENT: /s/ Bobby J. Washburn

"WITNESS: /s/ Wanda Smith"

The record indicates that Washburn and Shelby discussed the letter at some length and that Shelby instructed Washburn to take the agreement home overnight for further study. The letter does not contain any language that could be construed as contemplating a sale of a business, as is alleged by Washburn. Washburn's theory of the case is that he and GAPCo entered into an agreement for the sale of his business at a price of $72,000 to be paid at a rate of $2,000 per month guaranteed and at the end of each of the first two years of the agreement an amount that would raise yearly compensation to a total of $36,000. Washburn testified at trial that when he asked Shelby what would happen if he was terminated before the end of the first two years, Shelby replied that GAPCo would owe Washburn the balance of the $72,000.

Following the execution of the letter agreement, the parties entered into performance. Washburn did in fact act as a sales person for GAPCo, and GAPCo purchased all of Washburn's existing inventory. Washburn does not contest the fact that GAPCo fully performed the agreement for a period of nine months. However, after approximately nine months, GAPCo fired Washburn, allegedly for poor performance.

Washburn claims that GAPCo schemed to defraud him all along. He alleges that GAPCo undertook to induce him to sell GAPCo his business but, through fraudulent means, intended to acquire his business and then fire him without paying for the business.

Fraud

First, did the trial court err when it refused appellant's motion for J.N.O.V. on the fraud claim asserted by Washburn? This action was commenced on July 23, 1985. Because this suit was filed before June 11, 1987, the "scintilla rule of evidence" applies to the case. See § 12-21-12, Code 1975. A "scintilla of evidence" is defined as a mere gleam, glimmer, spark, or trace of evidence. Gross v. Republic Steel Corp., 400 So.2d 383 (Ala.1981). The plaintiff may defeat a motion for J.N.O.V. by showing so much as a mere scintilla of evidence in support of its complaint. Marion v. Hall, 429 So.2d 937, 943 (Ala.1983).

A motion for J.N.O.V. is really just a reassertion of the motion for directed verdict. It is necessary to the success of a motion for J.N.O.V. that the moving party be entitled to a directed verdict at the close of the evidence. Wilson v. Draper, 406 So.2d 429, 432 (Ala.Civ.App.1981). Moreover, if the nonmoving party has produced so much as a scintilla of evidence, then the motion for directed verdict or J.N.O.V. must be denied. Marion v. Hall, 429 So.2d 937, 943 (Ala.1983).

In Elrod v. Ford, 489 So.2d 534, 537 (Ala.1986), this Court stated the following rules:

"To be entitled to either directed verdict or J.N.O.V., Defendant must have proved to the trial judge that, from the evidence before the court at the time each motion was made, there was 'a complete absence of proof on a material issue or [that there were] no controverted questions of fact on which reasonable people could differ,' and that Defendant was entitled to judgment as a matter of law. Deaton, Inc. v. Burroughs, 456 So.2d 771, 773 (Ala.1984). Stated conversely, the motions for directed verdict and J.N.O.V. should not have been granted if reasonable inferences in favor of Plaintiffs' claims could have been drawn from the evidence or if there was any conflict in the evidence for resolution by a jury. O'Donohue v. Citizens Bank, 350 So.2d 1049 (Ala.Civ.App.1977)."

Mere statements of opinion will not suffice as evidence of fraud to induce the signing of a contract. There must be a false assertion of fact that is relied on by the other party. Ray v. Montgomery, 399 So.2d 230 (Ala.1980). The jury could have found that a false assertion of fact had been made to Washburn. There was evidence at trial that Shelby, with the knowledge of his superior, Lynn, negotiated with Washburn for the sale of Gadsden Solvent and that Shelby told Washburn that the contract of employment could end early but that, if it did, GAPCo would owe Washburn the balance up to $72,000.

In a promissory fraud case such as this one, the plaintiff has the burden of proving that the defendant, at the time he made his promise, had no intent to perform it. Green Tree Acceptance, Inc. v. Doan, 529 So.2d 201, 205 (Ala.1988). The plaintiff must show that the defendant did more than fail to perform his promise, because failure to perform alone is not sufficient evidence to show a present intent not to perform. Purcell Co....