McClintock v. Wellington Trade, Inc.

• Decision Date: 07 July 1988
• Docket Number: No. 76157,76157
• Citation: 187 Ga.App. 898,371 S.E.2d 893
• Parties: McCLINTOCK v. WELLINGTON TRADE, INC.
• Court: Georgia Court of Appeals

Page 893

371 S.E.2d 893

187 Ga.App. 898

McCLINTOCK v. WELLINGTON TRADE, INC.

No. 76157.

Court of Appeals of Georgia.

Decided July 7, 1988.

Rehearing Denied July 21, 1988.

Certiorari Denied Sept. 8, 1988.

C. David Hailey, Atlanta, for appellant.

James W. Penland, Atlanta, for appellee.

BEASLEY, Judge.

McClintock purchased from Containerhouse one hundred used ocean freight containers to be resold and utilized as mini-warehouses. The purchase was made on credit and effected by a Purchase and Security Agreement, drafted by McClintock's counsel working on the instructions of both parties. It provided for payment by three differing promissory notes, one dubbed short term and two dubbed long term. Each was secured by a set number of the containers, with differing specifications among the three groups.

Although title to all one hundred containers was delivered immediately, only sixteen of the first group of containers were physically delivered, as McClintock directed. McClintock failed to pay according to the terms of the notes and Containerhouse deemed McClintock to be in default of all three notes and made a written demand. McClintock's attorney wrote Containerhouse's attorney advising that McClintock did not consider himself to be in default due to the quality of the containers but that he elected to proceed with the appraisal method pursuant to paragraph 4.7 of the agreement.

Approximately one month later, McClintock's counsel again wrote Containerhouse's counsel with regard to the appraisal. The letter stated that it was McClintock's contention that the agreement became effective only with respect to sixteen containers which had been physically delivered and which were secured by the short term note; therefore, that McClintock would have those sixteen containers appraised and would apply the provisions of paragraph 4.7 on a pro rata basis, at the original agreed upon price of $2,600 per container. (The other two groups of containers bore a different price.) Two days later, Containerhouse's attorney replied that in addition to the sixteen containers which were actually delivered, there were six additional containers set aside for delivery but that McClintock never gave directions as to where he wanted to place them. (This letter erroneously referred to six containers rather than five to complete the number of twenty-one containers secured by the short term note.) It was Containerhouse's position that these containers should also be appraised and that there was a binding contract for McClintock to purchase all the containers referred to in the agreement.

McClintock had the sixteen containers appraised. Containerhouse had all of the containers appraised and determined that there was a deficiency. Containerhouse recovered the containers which had actually been delivered. Some of these and of the remainder of the one hundred were resold, and some were retained. Notice of the sale was not given to McClintock.

Containerhouse sued McClintock in three counts, one on each note, for the differences between the outstanding balances on the notes and the appraised values, a total of $107,100 plus pre-judgment interest at the contract rates (computed up to the time of filing as approximately $24,000) and statutory attorney fees. McClintock counterclaimed alleging that Containerhouse breached the agreement in that the initial sixteen units were of poor quality and non-conforming and that the company had defrauded him by inducing him to enter into the agreement knowing it would not perform, and by delivering units of inferior quality and of substantially lesser value than that contracted for. He also claimed that he was entitled to notice of the sale and since he did not get notice, no action for a deficiency was allowed.

A jury awarded Containerhouse $135,997.50 plus $2,160 sales tax and attorney fees and expenses of $14,020; the jury also found for plaintiff Containerhouse on the counterclaim.

1. Appellant contends that the trial court erred in ruling as a matter of law that he exercised his right to proceed under paragraph 4.7 of the Purchase and Security Agreement as to all one hundred containers, rather than only the sixteen containers which had been physically delivered.

He argues that in so ruling the trial court was "granting a partial summary judgment during the course of the trial" despite clear evidence that the appraisal election applied at most to the twenty-one containers which secured the short term note, that at the very least there was a factual question, including an estoppel issue, with regard to the scope of the appraisal request. Containerhouse responds that the court's ruling was a proper construction of the contract.

It becomes necessary to examine the relevant provisions of the parties' agreement. Paragraph 4.6 provided: "If an Event of Default ... occurs with respect to the Short Term Note and is continuing, Containerhouse, at its option, and upon 30 days' notice to McClintock, will, subject to McClintock's rights under Paragraph 4.7 have the right to take possession of the Containers securing the Short Term Note and may sell the Containers or any part or parts thereof at public or private sale and may apply the net proceeds, after deducting all costs and expenses for collection, sale and delivery, to the payment of the Short Term Note. If an Event of Default ... occurs with respect to either of the Long Term Notes and is continuing, Containerhouse shall, upon 30 days' written notice to McClintock, take possession of the Containers securing the Long Term Note(s) in default and shall sell such Containers or any part or parts thereof at public or private sale and shall apply the net proceeds, after deducting all costs and expenses of collection, sale and delivery to the defaulted Long Term Note(s). At a public sale, Containerhouse may purchase all or any part of the Containers offered at such sale. In addition, Containerhouse will have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code or otherwise as provided by law. McClintock will have the obligation promptly to assemble the Containers and make available to Containerhouse or its assignee at a place and time convenient to both parties. In addition to the 30-day notice of default, Containerhouse will give notice to McClintock of any sale or other disposition of the Containers and the mailing of such notice to McClintock at his address last known to Containerhouse, at least ten days before any sale or other disposition, conclusively will be deemed reasonable notice thereof."

Paragraph 4.7 provided: "(a) Notwithstanding anything to the contrary in the Agreement, in order to avoid loss to McClintock which may be occasioned by a distress sale of the Containers, Containerhouse or its assignee hereby agrees, if McClintock makes the election referred to in paragraph 4.7(b), to accept title to the Containers with regard to the Short Term Note, and in any event with respect to the Long Term Note(s), at the lesser of (i) the appraised fair market value of the Containers at the time of foreclosure ('Appraised Value,' as further defined hereinafter), or (ii) the amount then outstanding on the Long Term Note(s).

"(b) If McClintock receives from Containerhouse the notice of default referred to in Paragraph 4.6, McClintock may notify Containerhouse, within 30 days of the date of such notice, of its election to proceed in accordance with this Paragraph 4.7. If McClintock so elects, McClintock and Containerhouse will each retain, within 20 days of Containerhouse's receipt of notice of such election, an independent qualified appraiser ... to appraise as promptly as is practicable, but in any event within 30 days from the date of his appointment, the fair market value of the Containers based on their quality and quantity and the anticipated costs and proceeds of its disposition at the wholesale level on a commercially reasonable basis in accordance with practices then prevailing in the industry ... The Appraised Value will be the average of the values determined by these two appraisals; ... The determination of the Appraised Value by the appraisers or pursuant to appraiser arbitration, as the case may be, will be binding on the parties and enforceable in any court having jurisdiction thereof.

"(c) After the Appraised Value is determined McClintock will have the obligation to assemble the Containers and make them available to Containerhouse or its assignee at a place and time convenient to both parties. Thereafter, Containerhouse or its assignee will have all right, title and interest in the Containers."

Paragraph 4.9 provided: "Nothing contained in this Paragraph 4 will obligate McClintock further than to bind the right, title and interest of Containerhouse in and to the Containers, and on default hereunder McClintock will be personally liable for and only for, the amount due with respect to the Short Term Note, and that portion of Long Term Notes after application of any proceeds from the disposition, or other application of the value, of the Containers, as herein provided."

The ruling at issue came about following plaintiff's objection to defendant's direct examination of the attorney who drafted the purchase agreement. Defendant asked the attorney if when the attorney drafted the agreement, it was the attorney's understanding that the intention of the parties under paragraph 4.7 was that if there was an election by McClintock to proceed under that paragraph that McClintock would waive his rights to receive credit for monies that Containerhouse generated by selling the containers. Plaintiff objected on the basis that the question violated the parol evidence rule, because it was an attempt to use testimony to "construe and change the terms of an unambiguous contract," that the "contracts spoke for themselves." The jury was removed and the parties argued at length as to whether or not the contract...