McDonald v. Scarboro

• Decision Date: 02 August 1988
• Docket Number: No. 8726SC952,8726SC952
• Court: North Carolina Court of Appeals
• Parties: Linda T. McDONALD d/b/a Country Memories and the Linda MC Company v. Darrell SCARBORO, Amtek, Inc. d/b/a American Crafts and W. Gardner McCrary.

Page 680

370 S.E.2d 680

91 N.C.App. 13

Linda T. McDONALD d/b/a Country Memories and the Linda MC Company v. Darrell SCARBORO, Amtek, Inc. d/b/a American Crafts and W.

Gardner McCrary.

No. 8726SC952.

Court of Appeals of North Carolina.

Aug. 2, 1988.

Kenneth P. Andresen, Charlotte, for defendant-appellant W. Gardner mCcrary.

Petree Stockton & Robinson by David B. Hamilton and J. Neil Robinson, Charlotte, for plaintiff-appellee.

No brief filed by defendants Darrell Scarboro or Amtek, Inc., d/b/a American Crafts.

JOHNSON, Judge.

This is a civil action brought by plaintiff against defendants for breach of contract, tortious interference with contract and business relations, common law unfair competition, violation of G.S. 75-1.1, civil conspiracy and conversion.

The plaintiff, Linda McDonald, operates two sole proprietorships which manufacture, market, sell and distribute a variety of folk art. Plaintiff sells not only the products she manufactures, but also sells on a commission basis the products of other folk artists.

Defendant, Darrell Scarboro, is an artist, who is able to create a variety of figurines or sculptures in folk art. In the fall of 1984, Scarboro called plaintiff and requested that she agree to sell his folk art, which consisted of the figurines. On 6 December 1984, Scarboro met plaintiff at his residence and he showed her several pieces of his work. Plaintiff indicated to defendant that she was in the business of marketing folk art and that she could sell reproductions of his work, although she didn't manufacture it. Defendant informed plaintiff that he had a contract with Robert Stovall to produce his work. However, he informed her that he had terminated the contract with Stovall on 13 September 1984. According to the terms of the contract, the scheduled termination date was to be on 2 January 1985. Also, plaintiff and defendant discussed problems that Stovall encountered in having molds made from which satisfactory reproductions of Scarboro's work could be produced.

They also discussed the number of pieces defendant would be required to produce under the proposed agreement. Plaintiff agreed to pay for all manufacturing, to pay defendant a standard commission of 15% on each sculpture, and to lend defendant $1000.00, provided he repaid the loan within one year. After having several discussions, the parties reduced the agreement to writing.

On 26 December 1984, McDonald and Scarboro executed a contract for a term of five years. Pursuant to the contract, Scarboro assigned to plaintiff "all of the right, title and interest, including all copyrights" in the sculptures created. The contract also required defendant (Scarboro) to "create new and original sculptures exclusively" for plaintiff. Plaintiff agreed to pay Scarboro 15% of the net sales price of all reproductions of Scarboro's sculptures she sold. Also, plaintiff was required to make quarterly accountings to Scarboro and to submit payment for his portion of the "net sales" of the previous quarter.

Pursuant to contract specifications, Scarboro provided eight sculptures to plaintiff during the first calendar quarter. Plaintiff attempted to have the sculptures reproduced at a ceramics shop which Scarboro recommended, but was unsuccessful. The ceramics shop completed the molds unsatisfactorily, and as a result plaintiff was unable to fill the orders she received at an Atlanta trade show totalling $15,000.00. Scarboro, therefore received no payment for first quarter 1985 sales.

On 31 March 1985, defendant W. Gardner McCrary, owner and president of defendant Amtek, Inc. d/b/a American Crafts, saw some of Scarboro's work at a trade show in Charlotte, North Carolina. Alta Paxton was displaying the sculptures and informed him that Scarboro was the artist, and that Stovall reproduced them and was the sales agent. Later that day, McCrary met Scarboro at the trade show. McCrary met Scarboro again later that evening at Scarboro's residence where they discussed the possibility of his reproducing Scarboro's work.

In April of 1985, McCrary and Scarboro met at McCrary's place of business. Scarboro informed McCrary that he had signed a contract with McDonald and showed him a copy of the contract. McCrary told Scarboro that he would take the contract to the company lawyer to determine whether Scarboro was bound by the agreement. To prevent any bias, they received a second opinion from an outside lawyer concerning the contract's validity. As a result of those two opinions, McCrary and Scarboro further discussed an employment arrangement whereby Scarboro would become an employee of Amtek, would work at Amtek for $245.00 per week with related benefits, would produce sculptures for the company which would belong to the company and would be paid 15% of the gross sales of his work. Also, McCrary informed Scarboro that he would pay Scarboro's attorney fees as "protection" if Scarboro were sued for breach of contract.

During this time, Scarboro approached McDonald and informed her that he "wanted to get out" of the contract. He also informed her that he had been approached by some men who could make the reproduction molds themselves; that they wanted to give him a place to work and to sculpt and that they would pay him a salary. In response, McDonald stated her willingness to work with these unnamed men, and offered to allow them to make reproductions while she sold Scarboro's work. No agreement was reached concerning this proposition.

In early April 1985, Scarboro informed McDonald by telephone that he no longer considered their contract valid, that he needed a job, that she had experienced too many problems getting his art reproduced, and that he needed to make a living. On 16 April 1985, Scarboro sent a letter to McDonald to the same effect.

On 22 April 1985, Scarboro began work at Amtek pursuant to the terms of their oral agreement. Scarboro provided Amtek with more than 20 original sculptures and continued to work until he was enjoined from doing so.

Plaintiff filed her complaint and motion for preliminary injunction on 26 June 1985 against defendants Scarboro, Amtek and McCrary. The objective of plaintiff's preliminary injunction was to have defendants terminate the selling of the sculptures and for defendants to return all original sculptures that Scarboro had made since his employment with Amtek. On 15 July 1985, the court granted plaintiff's preliminary injunction pursuant to the terms stated above.

On 3 September 1985, defendant Scarboro filed his answer, counterclaim and cross-claim. On 28 October 1985, defendants Amtek and McCrary filed their answer as well as a counterclaim against plaintiffs.

On 25 November 1985, plaintiff filed her reply to defendant Amtek's counterclaim. On 2 May 1986, defendant Scarboro filed his amended answer, counterclaim, and cross-claim against McCrary and Amtek for attorney fees. In addition, Scarboro filed a third-party complaint against plaintiff's husband, Bill McDonald. On 21 July 1986, plaintiffs filed answer to the third-party complaint, and a reply to Scarboro's amended counterclaim. On 2 March 1987, defendants Amtek and McCrary filed their replies to defendant Scarboro's counterclaim.

This cause came on for trial before a jury on 2 March 1987. Based upon the issues presented, the jury found, inter alia: (1) that Amtek and McCrary unjustifiably induced Scarboro to breach his contract with McDonald, (2) that Amtek and McCrary interfered with the business practice and business relations of McDonald, (3) that these actions were in, or affected commerce, and (4) that McDonald was injured as a proximate result of the conduct of Amtek and McCrary. The jury awarded damages in favor of McDonald and against all defendants. Furthermore, the jury found for Scarboro on his cross-claim against McCrary and Amtek for attorney fees.

After the verdict, the trial court concluded that the facts found by the jury constituted unfair or deceptive trade practices in or affecting commerce in violation of G.S. 75-1.1(a) and therefore trebled the damages and awarded McDonald attorney fees pursuant to G.S. 75-16.1.

From the jury's verdict and the trial court's conclusions and award, defendant McCrary appealed. No appeal was perfected by defendant Scarboro or defendant Amtek.

By his first Assignment of Error, defendant presents an issue of first impression for this Court to resolve, to wit, whether tortious interference with business or contractual relations is a violation of G.S. 75-1.1.

The overall purpose and legislative intent of G.S. 75-1.1 is "to declare deceptive acts or practices in the conduct of any trade or commerce in North Carolina unlawful, to provide civil means to maintain ethical standards of dealings between persons engaged in business and the consuming public within this State, and to enable a person injured by deceptive acts or practices to recover treble damages from a wrongdoer." Hardy v. Toler, 24 N.C.App. 625, 630-31, 211 S.E.2d 809, 813, modified on other grounds, 288 N.C. 303, 218 S.E.2d 342 (1975). Furthermore, "[t]he statutes do not protect only individual consumers, but serve to protect business persons as well." Concrete Service Corp. v. Investors Group, Inc., 79 N.C.App. 678, 685, 340 S.E.2d 755, 760 (1986) (citation omitted). Thus, disputes between competitors in business fall under the province of the statute. See Harrington Manufacturing Co. v. Powell Manufacturing Co., 38 N.C.App. 393, 248 S.E.2d 739 (1978), cert. denied, 296 N.C. 411, 251 S.E.2d 469 (1979). Whether a trade practice is unfair or deceptive usually depends upon the facts of each case and the impact the practice has on the marketplace. Bernard v. Central Carolina Truck Sales, Inc., 68 N.C.App. 228, 314 S.E.2d 582, disc. rev. denied, 311 N.C. 751, 321 S.E.2d 126 (1984). Based upon the jury's findings of fact, the court must determine as a matter of law whether a defendant's conduct violates this section. Love v....