Lee v. Thermal Engineering Corp.

Decision Date28 October 2002
Docket NumberNo. 3556.,3556.
Citation352 S.C. 81,572 S.E.2d 298
PartiesRichard E. LEE, Respondent/Appellant, v. THERMAL ENGINEERING CORPORATION and Willie Best, Appellants/Respondents.
CourtSouth Carolina Court of Appeals

W. Duvall Spruill, of Columbia; for appellant-respondent(s).

Edwin Russell Jeter, of Columbia; Richard J. Morgan, of Columbia, for respondent-appellant(s).

CURETON, J.:

Richard E. Lee sued Thermal Engineering Corp. and its founder, Willie Best (collectively, "Thermal"), asserting claims for breach of contract and violation of the Payment of Post Termination Claims to Sales Representatives Act, S.C.Code Ann. § 39-65-10 to -80 (Supp.2001). Lee also sought punitive damages and attorney fees. Following a bench trial, the court granted judgment to Lee. In a separate order, the court awarded Lee attorney fees and prejudgment interest, but denied Lee's request for punitive damages. Both Thermal and Lee appeal. We affirm in part and reverse in part.

FACTS

Thermal manufactures curing ovens, paint booths and control panels that operate manufacturing equipment. On October 5, 1987, Thermal entered into a written agreement with Lee to serve as its sales representative in the Southeastern United States.

The agreement, which was to run from year to year, provided that Lee was to be paid on a commission basis for any orders accepted by Thermal. Either party could terminate the relationship upon six months written notice; however, the agreement would remain in force for six months after notice of termination. Upon termination of the contract, Lee was entitled to commissions for accounts he generated for a period of eight months after the termination. If an order was received from one of Lee's customers during the eight months after termination then an additional eight-month period would be in effect from the order date and would continue in effect so long as orders were received during the eight-month interval.

On March 29, 1995, Thermal sent Lee notice of termination of the contract. Lee reminded Thermal of the six-month notice provision in their contract and requested an accurate accounting of any commissions that might be due during the notice period.

Thermal disputed the application of the notice provision and advised Lee that the March 29th letter had declared their contract to be at an end. Thermal further advised Lee that if he was already working on any particular projects that "Thermal [was] willing to work with [him] on a case-by-case basis so that those efforts won't be wasted." On November 9, 1995, after a demand from Lee's attorney, Thermal paid Lee $7098.42 for the undisputed, pre-termination commissions earned prior to March 29, 1995.

Lee filed this action against Thermal seeking the balance of his post-termination commissions, plus punitive damages and attorney fees. The trial court awarded Lee a judgment of $58,465.64 for all the unpaid commissions in accordance with the notice provisions of the contract. The court's order further provided Lee was entitled to reasonable attorney fees and instructed him to submit an affidavit of attorney fees within fifteen days of receipt of the order. Following a hearing, the court awarded Lee pre-judgment interest of $16,901.61 and attorney fees of $25,122. This appeal follows.

LAW/ANALYSIS
Thermal's Appeal
I. Oral Amendment of Contract

Thermal asserts the trial court committed reversible error in ruling the contract was orally amended because Lee never asserted in his pleadings that the written contract was modified. We believe the question of whether or not the contract was orally amended was presented to the trial court.

Initially, we discuss Thermal's argument that Lee's pleadings make no claim that the contract was orally amended to include "engineered" products within its terms. Thermal argues that clearly the complaint bases Lee's right to recover on the written contract and that Lee never made a motion to amend his pleadings to assert a right to recover based on an oral modification. Notwithstanding such failures, we conclude Lee's pleadings should not preclude recovery in this case. First, we note that Thermal consistently asserted during trial that Lee was not entitled to recover because the commissions he claimed were either not based on sales personally made by him or that the sales were not of "pre-engineered" products. Thermal never asserted during trial that the pleadings limited Lee's recovery to commissions from the sale of pre-engineered products only. Having failed to object to the court's consideration of Lee's entitlement to commissions based on Lee's failure to plead a modification of the Parties agreement, Thermal is considered to have tried the issue by consent. See Simmons v. Tuomey Reg'l Med. Ctr., 330 S.C. 115, 125 n. 2, 498 S.E.2d 408, 413 n. 2 (Ct.App.1998)

(an issue not expressly mentioned in the complaint but tried without objection and incorporated in the trial court's order is tried by consent according to Rule 15 SCRCP); McCurry v. Keith, 325 S.C. 441, 447, 481 S.E.2d 166, 169 (Ct.App.1997) (issues tried by consent will be treated as if raised in the pleadings).

Secondly, even if the record on appeal could be interpreted to show Thermal raised the oral modification issue at trial, the issue must be both presented to and ruled upon by the trial court before it will be considered on appeal. See Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998)

("It is axiomatic that an issue cannot be raised for the first time on appeal, but must have been raised to and ruled upon by the trial judge to be preserved for appellate review."); First Union Nat'l Bank of S.C. v. Soden, 333 S.C. 554, 566, 511 S.E.2d 372, 378 (Ct.App.1998) ("It is a fundamental rule of law that an appellate court will affirm a ruling by a lower court if the offended party does not challenge that ruling.").

We now move to Thermal's claim that the evidence does not support the trial court's holding that the contract in issue was orally amended. "It is true that a simple contract completely reduced to writing cannot be changed or modified by parol evidence of what was said or done by the parties at the time it was made, because the parties agree to put the contract in writing and to make the writing part, and evidence thereof." Evatt v. Campbell, 234 S.C. 1, 6, 106 S.E.2d 447, 450 (1959) (quoting Mebane v. Taylor, 164 S.C. 87, 94, 162 S.E. 65, 67 (1932)). "Nevertheless, by the rules of the common law it is competent for the parties to a simple contract in writing before any breach of its provisions, either altogether to waive, dissolve, or abandon it, or vary or qualify its terms, and thus make a new one." Id. "A written contract may, in the absence of statutory provisions requiring a writing, be modified by a subsequent oral agreement." Id.

In this case, Best testified that Thermal entered into the written agreement with Lee for the purpose of securing orders for pre-engineered products so that its manufacturing division could continue production even when its engineering division was working on custom-designed items. Apparently, however, very few orders materialized that did not require the assistance of Thermal's in-house engineering division. Although Best stated he did not "know how [Lee] got changed over to the selling of other products," he acknowledged that Thermal paid Lee for all orders he solicited during the contract period at the same commission rate, regardless of whether the items were pre-engineered. Kerry Smith, Thermal's Vice President and General Manager of the Control Division also acknowledged that Lee was never refused a commission on the basis the order was not for a pre-engineered product. Moreover, Smith acknowledged that he discussed this with Lee, and approved of him selling engineered products.

Finally, Lee and Thermal disagree as to the definition of "pre-engineered" and "engineered". According to Lee, Thermal never had any pre-engineered products to sell. Smith acknowledged it had few, if any, pre-engineered products and that most of the products Lee sold were "engineered" as he understood the term. Counsel for Thermal maintained there was an oral agreement to sell engineered products that "ran parallel" to the written contract, but argued it was not incorporated into the written contract; therefore, the contract's notice provision was not applicable. Thermal's attorney conceded on Thermal's behalf that all of the jobs for which Lee was compensated in the November 1995 payment, following Lee's termination, were for "engineered" items.

While acknowledging that almost from the beginning Lee secured orders mostly for custom-made products that required the services of Thermal's engineering division, Thermal nevertheless paid Lee throughout the contract period for all orders he secured in his territory, not just for pre-engineered products. Thermal also continued to pay Lee commissions, per the language of their written agreement, for orders procured by others in his territory, although Lee did not participate in bringing the orders to the company.

We agree with the trial court's finding that the parties orally modified their written contract to encompass paying Lee commissions for all products sold within Lee's exclusive territory, regardless of whether the products were pre-engineered. Accordingly, we affirm the trial court's ruling that Lee was due $58,465.64 in unpaid commissions that accrued during the period of the contract, and subsequent to termination, as per the contract's residual notice provision.

II. Prejudgment Interest Award under Rule 60(a)

Thermal next contends the trial court committed reversible error in concluding Rule 60(a), SCRCP was an appropriate vehicle for awarding prejudgment interest to Lee. We disagree. The judgment in this case was entered on August 23, 1999, but the Clerk of Court inadvertently failed to provide either party with notice of entry of the...

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