General Tire & Rubber Co. v. Distributors, Inc.

• Decision Date: 14 December 1960
• Docket Number: No. 236,236
• Citation: 117 S.E.2d 479,253 N.C. 459
• Parties: GENERAL TIRE AND RUBBER COMPANY v. DISTRIBUTORS, INC.
• Court: North Carolina Supreme Court

Page 479

117 S.E.2d 479

253 N.C. 459

GENERAL TIRE AND RUBBER COMPANY v. DISTRIBUTORS, INC.

No. 236

Supreme Court of North Carolina.

Dec. 14, 1960

Orr, Osborne & Hubbard, Charlotte, for plaintiff.

Ralph C. Clontz, Jr., Charlotte, for defendant.

MOORE, Justice.

This case was here at the Fall Term 1959. In the opinion delivered by Bobbitt, J., the judgment of the court below sustaining a demurrer to defendant's counterclaim was reversed. General Tire & Rubber Co. v. Distributors, 251 N.C. 406, 111 S.E.2d 614. The pleadings are summarized in that opinion and there is no necessity for a comprehensive review of the pleadings on this appeal. We set out herein a general survey of the transactions between the parties and refer to the pleadings only when necessary to an understanding of the questions presented.

The plaintiff manufactures Bolta-Floor vinyl flooring and other floor covering products. In July 1956 plaintiff and defendant entered into a parol agreement whereby defendant became the sole and exclusive distributor of plaintiff's line of floor covering products for North and South Carolina, effective 30 July 1956, for 'an indefinite period of time * * * so long as defendant made reasonable efforts to promote said products * * *.' (Quotation is from article V of defendant's counterclaim). Defendant offered evidence that the distributorship was to continue a minimum of seven years, two years to promote and establish the line and five years for profitable operation to recoup promotion costs. However, this testimony as to definite time is contrary to defendant's pleadings. Plaintiff offered evidence that the distributorship was to continue as long as the parties could 'mutually work with one another and mutually profit by the association.'

Defendant was required to dispose of a competitive line of products which it had been selling and distributing prior to the making of this contract. This was done.

Defendant agreed to promote plaintiff's products in the Carolinas at its own expense. It was a new line which had been put on the market 1 January 1956. According to defendant's evidence the promotion entailed considerable cost and involved the acquiring of dealers, local advertising, furnishing samples and displays to dealers and others, and personal calls on architects. According to plaintiff no extra expense for promotion was contemplated for the reason that defendant was already established in this type of business and liberal quantities of samples and advertising matter would be and were furnished by plaintiff.

Defendant had insufficient working capital to purchase and store in its warehouses an adequate inventory of floor covering products to implement and maintain the distributorship. As a credit arrangement, the parties executed in writing a 'Warehouse Agreement' or consignment contract dated 30 July 1956. It provides that merchandise be consigned to defendant and placed in defendant's warehouses, title is to remain in plaintiff until the goods are disposed of in the course of business, defendant is to furnish monthly inventories of the consigned goods and lists of transfers to and from stock and make weekly reports of with-drawals, defendant is to make financial statements of its business upon request and make payments monthly for withdrawals from inventory, and breach of the agreement shall be just cause for termination and the agreement may be 'cancelled by either party at any time upon three days' written notice.' It was orally agreed that the consigned inventory should be approximately $30,000 in value.

Plaintiff says that there was parol understanding that the warehouse agreement would be terminated at the end of one year, at which time defendant was to purchase and pay for the inventory. Defendant says it was a permanent arrangement to last as long as the distributorship. However, there was a new agreement in July 1957 respecting this matter. Plaintiff agreed to continue consigning the goods as before for the ensuing three years, and defendant was given three years to consummate the purchase of the inventory. At the first of each month plaintiff was to bill defendant for 1/36 of the inventory of the warehouses as of the end of the preceding month, and defendant was to pay these billings along with the current accounts. The payments on inventory were to be kept in a trust fund and at the end of the 36 months period be applied to the purchase and title would then pass to defendant. Plaintiff agreed to withdraw from the warehouses slow-moving items, and its representative was to inspect and agree upon the items to be withdrawn. These items were not removed until December 1957.

In the latter part of 1957 and until June 1958 defendant was in arrears in payment of its current accounts up to $5,500. It never paid any installments for purchase of the consigned merchandise. Defendant explained that it had in its files for several months a check for payment of the arrearage in current accounts, but did not transmit it or pay the purchase installments for the reason that slow-moving goods were not withdrawn from the inventory promptly and the installment billings were not correct.

In January 1958 plaintiff advised that defendant's business was getting shaky and requested guaranties signed by defendant's stockholders. On 24 February 1958 defendant offered to make arrangements for a cash purchase of inventory, requested a conference and asked 30 days to put affairs in order. On 28 February 1958 plaintiff demanded guaranties or surrender of the inventory. Defendant did not furnish guaranties from stockholders, but sent the personal guaranties of its president and vicepresident and their wives.

On 6 March 1958 plaintiff wired defendant requesting surrender of the consigned goods. On 24 March 1958 this action was commenced. The merchandise was seized under claim and delivery proceedings, held by the sheriffs for three days and delivered to plaintiff in default of replevin bond.

Thereafter, defendant offered again to purchase the inventory and at the trial explained that it had made arrangements with a New York factor for the necessary funds. Defendant continued to take orders for plaintiff's products and either sent the orders directly to plaintiff or filled them on a cash basis from a warehouse in Charlotte maintained by plaintiff. Plaintiff required that the orders mailed to it be accompanied by cashiers' checks.

There was a conference and discussion by the parties on 1 May 1958. Defendant contends a new contract was made whereby the warehouse agreement was reinstated, a credit arrangement for current withdrawals of merchandise was agreed upon, and the distributorship continued. According to defendant's version it was to immediately pay the $5,500 arrearage and furnish the personal guaranties of its president and vice-president in the amount of $3,000 each to secure current accounts. The past due account was paid in full in June 1958. The guaranties were submitted. Plaintiff contends no contract was made, that it agreed to consider reinstatement of the warehouse agreement and the arrangement for current credit provided defendant would pay its account in full, furnish a satisfactory financial statement, and give acceptable guaranties supported by a showing of solvent assets other than investments in defendant corporation and homes of guarantors.

Plaintiff advised defendant that the financial status of defendant corporation and the guarantors was not satisfactory and declined further credit.

Defendant filed answer in this action on 18 July 1958 and set up a counterclaim for $50,000 damages for breach of contract and $100,000 punitive damages for wilful, wanton and malicious conduct of plaintiff in breaching the contract.

Plaintiff gave no notice of termination of the distributorship until after defendant had filed its counterclaim.

Defendant offered testimony that it had expended $22,915.91 in promoting plaintiff's line of floor covering in the Carolinas.

Defendant is now insolvent. Its balance sheet for the year ending 31 August 1956 showed a net operating loss of $414.58, and for the year ending 31 August 1957 a net operating loss of $10,900. During the fiscal year 1956-1957 the ratio of its assets of its assets to liabilities declined from 1.26 to 1, to 1.16 to 1, and the book value of stock from $98.57 to $64.58.

Appellant makes twenty-two assignments of error. Only three merit discussion. Defendant's motion for nonsuit at the close of the evidence was properly overruled.

The questions for consideration are: (1) Were the issues submitted by the court sufficient in form and substance to present all phases of the controversy? (2) Did the court err in placing the burden of proof on defendant? (3) Did the court err in its instructions on damages?

Issues arise upon the pleadings only. G.S. § 1-196. Darroch v. Johnson, 250 N.C. 307, 311, 108 S.E.2d 589. An issue of fact arises on the pleadings whenever a material fact is maintained by one party and controverted by the other. Wells v. Clayton, 236 N.C. 102, 105, 72 S.E.2d 16. Ordinarily the form and number of issues in a civil action are left to the sound discretion of the judge. Durham Lumber Co. v. Wrenn-Wilson Construction Co., 249 N.C. 680, 685, 107 S.E.2d 538. '* * * it is the duty of the judge, either of his own motion or at the suggestion of counsel, to submit such issues as are necessary to settle the material controversies arising in the pleadings; and * * * in the absence of such issues or admissions of record equivalent thereto sufficient to reasonably justify directly or by clear implication the judgment rendered therein, this court will remand the case for a new trial.' Tucker v. Satterthwaite, 120 N.C. 118, 122, 27 S.E. 45, 46. G.S. § 1-200. Nebel v. Nebel, 241 N.C. 491, 502, 85 S.E.2d 876.

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