Microclean Tech., Inc. v. Envirofix, Inc.
| Decision Date | 10 July 2013 |
| Docket Number | No. 5135.,5135. |
| Citation | 744 S.E.2d 210,404 S.C. 207 |
| Parties | MICROCLEAN TECHNOLOGY, INC., Appellant, v. ENVIROFIX, INC., Respondent. Appellate Case No. 2011–193786. |
| Court | South Carolina Court of Appeals |
OPINION TEXT STARTS HERE
Terry A. Finger, of Finger & Fraser, PA, of Hilton Head Island, for Appellant.
Robert Ernest Sumner, IV, and Trudy Hartzog Robertson, both of Moore & Van Allen, PLLC, of Charleston, for Respondent.
Appellant MicroClean Technology, Inc. brought this action against Respondent EnviroFix, Inc. for breach of contract, claim and delivery, and quantum meruit arising out of a dispute between the parties about the performance of two licensing agreements. EnviroFix counterclaimed for breach of contract, breach of the covenant of good faith and fair dealing, quantum meruit, negligent misrepresentation, and fraudulent misrepresentation. After a bench trial, the Beaufort County Master–In–Equity issued an order in which he found EnviroFix had terminated one of the agreements and owed MicroClean only those license fees accruing during the notice period on that agreement. The Master also allowed EnviroFix to retain possession and ownership of certain items that MicroClean sought in its claim and delivery action and awarded MicroClean the security deposit paid by EnviroFix as liquidated damages for the property. Although the Master also granted MicroClean damages for breach of contract, he offset this award by a greater amount of damages granted to EnviroFix on its breach of contract counterclaim. MicroClean appeals. We affirm in part, reverse in part, and remand.
MicroSweep, a Delaware corporation with its principal place of business in Texas, is a manufacturer of certain proprietary products. In 2004, MicroSweep began to distribute the BioTower, a machine used to clean and purify the air in cars, homes, and commercial establishments.
MicroClean, a South Carolina corporation with its principal place of business in Hilton Head, is a licensor of the BioTower. Ansley Cohen and Jim Bragonier were its principals and officers during the events in question. On August 2, 2004, MicroSweep and MicroClean entered into a written distributorship agreement granting MicroClean a license to distribute the BioTowers.
EnviroFix, a North Carolina corporation with its principal place of business in Raleigh, provides cleaning services and uses MicroSweep's proprietary products. During the events in question, David Stoner was the principal of the company.
On July 14, 2004, about two weeks before its agreement with MicroSweep was final, MicroClean entered into a License Agreement with EnviroFix in which EnviroFix received a non-exclusive right and license to use proprietary products manufactured by MicroSweep in certain geographic locations for six years.
Under Section 3 of the License Agreement, EnviroFix was to pay to MicroClean a territory fee of $25,000 when the parties signed the Agreement. Thereafter, for a six-year term, EnviroFix was to pay MicroClean a monthly license fee for the use of four BioTowers provided by MicroClean. The license fee was $1,000 per month and due on the first day of each month for the first twelve months. After that time, the fee was to increase to $1,250 per month. The parties further agreed “the License Fee for the BioTowers shall be due on each machine for no more than six years after delivery, and once License fees have been made for six years[,] ownership of such BioTower will be deemed transferred to [EnviroFix], with no further payment being due for such machine.”
Section 3 also provided that during the six-year term, MicroClean would “have the responsibility for maintenance and repairs on the Proprietary Products, except to the extent that any such repairs are necessitated by the neglect or wrongful actions of [EnviroFix], in which case [EnviroFix] was to make the repairs at its own cost.” Furthermore, during any period that a proprietary product was under repair by MicroClean and the repair was not necessitated by neglect or wrongful actions attributable to EnviroFix, MicroClean was to waive the monthly license fee and provide a substitute product if one was available.
Pursuant to Section 4, EnviroFix paid a security deposit of $15,000 for the four BioTowers when the parties executed the agreement. This deposit “ was to be returned at the end of the six year term, provided [EnviroFix] has been in full compliance with all terms hereof.”
Section 7(c) of the License Agreement addressed the issue of late payments and provided that
Several sections of the License Agreement addressed the parties' rights and obligations in the event the agreement was to be terminated.
Section 2 gave EnviroFix the right to terminate the agreement without cause, provided it gave “60 days advance written notice of its desire to terminate this Agreement, unless this Agreement shall have been sooner terminated by [MicroClean] as a result of breach hereof by [EnviroFix].”
Under Section 9, MicroClean had the right at its election to declare the License Agreement “immediately terminated” in the event of noncompliance by EnviroFix with any provision in the agreement and EnviroFix's failure to cure the breach within twenty days following written notice of the breach.
Under Section 10, upon termination or expiration of the License Agreement, MicroClean was to take possession of all proprietary products that were provided to EnviroFix for less than six years. EnviroFix was to “fully cooperate with [MicroClean] in the delivery of all such Proprietary Products used by [EnviroFix], which delivery shall be at the expense of [MicroClean].” The parties further agreed that MicroClean “shall have the right to pick up such items without having to resort to legal process of any kind.” EnviroFix had the right to request that MicroClean purchase any equipment licensed for the full six-year term at fair market value. This value was to be determined by an accountant or other financial professional regularly employed by MicroClean; however, EnviroFix had the right to have its own financial professional value the equipment as well. If the parties disagreed on the fair market value, they were to have this determination made by an independent appraiser.
Section 12 provided that “[a]ll notices, requests, demands, tenders and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if hand delivered, if sent by reputable overnight delivery service, or if mailed, by certified mail, return receipt requested, postage prepaid.” Section 12 also gave specific addresses for both MicroClean and EnviroFix. In addition to a post office box address for MicroClean, Section 12 also gave MicroClean's street address for notices sent by overnight delivery.
On May 9, 2005, the parties executed a second document, entitled “Equipment Schedule,” whereby EnviroFix obtained two additional BioTowers from MicroClean at a total cost of $7,000 plus monthly payments of $373. The monthly payments were due on the tenth day of each month from July 10, 2005, until July 10, 2008. Upon receipt of the thirty-sixth monthly payment, ownership of these two BioTowers would be deeded to EnviroFix. The Equipment Schedule referenced the License Agreement, stating in part: “It is agreed that as each new piece of licensed equipment is provided to [EnviroFix], the parties will sign a new copy of this page, detailing the equipment and terms and will attach same to the License Agreement, intending to incorporate the Schedule into the License Agreement.”
Although the BioTowers were effective in removing odors, EnviroFix complained the caps on the machines warped and the digital timers did not work. MicroClean characterized the complaint about the caps as a cosmetic issue that did not impair the performance of the BioTowers; however, EnviroFix maintained the problem adversely affected consumer confidence. Similarly, whereas MicroClean contended the timers were an optional feature that increased the convenience of the BioTowers but did not affect the actual operation of the equipment if they did not operate as expected, EnviroFix asserted proper functioning of the timers was important for safety and quality control.
On December 4, 2005, Stoner wrote a letter to MicroClean in which he expressed dissatisfaction with MicroClean's performance. In his letter, Stoner stated he informed MicroClean as early as December 2004 about mechanical problems EnviroFix was experiencing with the BioTowers, including not only the malfunctioning of the timers and the warping of the tower caps, but also a motor fan failure. Stoner also asserted that MicroClean: (1) failed to respond to his complaints in a timely manner; (2) never inspected or tested the BioTowers to ascertain whether they were in good working order; (3) failed to perform periodic maintenance on the machines; and (4) did no repairs or maintenance except for recent repairs made by MicroSweep on one machine. Stoner's letter ended as follows:
This letter references only a few of the things you have not done as provided for by the terms [of] our agreement. Some may argue that these breeches [sic] of contract may be viewed as having already terminated our agreement. I do not know. I do know that due to your actions, or the lack thereof, that the spirit of the agreement has been violated and is dead.
Please be advised I am not going to pay my monthly fees this month, nor will I pay any future monthly fees until my machines are repaired. I also ask that you remit to me $13,377.00 that I have paid in monthly fees on machines that are in...
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MicroClean Tech., Inc. v. EnviroFix, Inc.
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