# FILED December 9, 1997 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF APPEALS OF TENNESS EE

EAST ERN S ECTI ON
SUPE R GRI P CORP ORATI ON, ) C/A NO. 03A01-9707-CV-00257 ) Plaintiff-Appell ee, ) S ULLI VAN LAW ) v. ) HON. R. JER RY BECK, ) J UDGE B & D S UP ER GR IP, IN C., ) ) AF FI RMED AND De fend ant-A ppella nt. ) REMANDED

ARTH UR M . FOWLE R, McKinnon, Fowler, Fox & Tayl or, J ohnson City , for Plaintiff-Appell ee. PA UL RA YM ON D W OH LF OR D, B ristol, for D efen dant-A ppella nt.

O P I N I O N Franks, J.
In thi s contr act action, t he Trial Judge entered judgment for plaint iff against defe ndant in the a mou nt of $50 ,431.29, and dismissed d efenda nt’s counterclaim wh ich ha d sou ght d ama ges f or plain tiff’s alle ged b reach of the distribu torship agree men t. Defendan t has appealed to this Court and presents t hese issues: 1. Whether the Court erred i n finding t

hat the parti es had agree d upon a new contract

for a pri ce incr ease in December, 1994. 2. Whether the Court erred i n holding t

hat the freight

charges of Two H undred Dollar s ($200. 00) per shi pment became part of the origina l Distrib ution C ontrac t. 3. Whether the Court erred i n finding t

hat the deducti on of the freight charges fr om invoices c onsti tuted a materi al brea ch of the Distributi on Contract between the parties.2 4. Whether the Court erred i n determi ning the e quiti es between the parties to be in f avor of the Ap pellee and a gains t the A ppella nt. Plaintiff and defenda nt ente red int o a dist ribut orship a greement for the sale of minin g and indu strial tires in 1 987 . The agree men t was drafte d by def enda nt, and w as fo r the sa le of tire s by plaintif f to de fend ant w ith price s set ou t as deta iled in the agre ement. The Tri al Judge heard the evi dence without a juryand fil ed a comprehensive and detai led memorandum opini on, setting for th his findings and conclusi ons of law. The Tri al Court de termine d that pl ainti ff was entit led to recover $22,800.00 f

or unpaid freight c harges, $3,431.00 f or unpaid warr anty clai ms, and $24 ,200 .00 f or u npa id sa les d isco unt , all as req uire d un der the te rms of th e co ntra ct. He also dete rmined that withhol ding the payment of shippi ng charges bythe defendant consti tuted a

breach of the contra ct, which formed the bas is for dismis sing the
cou nter -co mp laint
.

We r ev ie w de novo upon the rec ord and pres ume the TrialJudge found the f acts corr ectly, unle ss the evi dence p repon derates aga ins t hi s fi nding s. T. R.A.P. Rule 13 (d). The fi rs t t wo i ss ue s wi llbe co ns id er ed to ge th er . T he ev id en ce sh ows that during the f

all a nd summer of 1994, the parti es were in negot iati ons for a price increa se for the mining tires . The TrialJudge, r ely ing heavi ly upon a letter fr om def end ant’ s atto rne y, con clud ed th at the par ties h ad c ont racte d fo r a p rice i ncr eas e. The letter, in pe rtinent p art, stated :

to put an e nd to our di scussi ons about price i ncreases for the c ontract year 1994-95, B & D accepts y our sli ding scal e price s for the last half of the contract y ear. The price i ncrease for the fi rst ha lf of the contra ct year 199 4-95 will be effe ctive O ctobe r 1, 19 94, or com men cing w ith your P.O . #T2 21. B & D expe cts to be billed f or thes e incre ases sh ortly after the new year. Defendan t argues that i ts acceptance of the price incr ease for the first half of the year was conditional upon pl ainti ff developi ng new tires and resol ving the3

freight charges i n disput e. The Tria l Judge, in addres sing this i ssue, said: It se ems clear

that t he letter of December 20, 1994 went beyond preliminarynegotiations, and constituted a manifestati on of willingness to ente r int o a bargai n that onl y r equired Super Grip to bi ll or

invoice B & D f or th e retr oac tive p rice i ncr eas e.

. . . When Super Grip bill ed B & D for the retroac tive price i ncrease, as request ed by B & D, the cont ract was eff

ecti ve, and B & D’s later atte mpt to withhold west coas t shi pping charge s consti tuted a breach by B & D. We agree with the Trial Judge that the fore going constituted a contr act betw een th e partie s. The record show s that in F ebru ary of 19 88, de fend ant ag reed to pay an a dditi onal $200. 00 in frei ght charge s to have cont ainers of tires deli vered from
a w est coa st port o verlan d, in ord er to sp eed u p deliv ery of the conta iners. T his additi onal fre ight charge was added to e ach contai ner of mini ng tir es order ed from 1988 through August of 1994, for a total of

114 contai ners, but it

was agreed by the parties in Au gust of 19 94, such c harge w ould no longer be a dded to the invoices. In Januaryof 1995, pla inti ff bil led defendant for monies owing. Defendant sent payment of only $13,221.45 of

the invoi ced amount, t

hereby deducti ng the sum of $22, 800.00 from the am oun t billed. T he T rial Jud ge fo und that de fend ants’ re fusa l to pay the full billconsti tuted a

breach of the contra ct by defendant. Defendant ins ist s that the deduction of $22,800.00 wa s not a breach of any contract or agreement of the parties, i.e ., t he origi nal dis tri bution agreement of 1987 does not provide for

the addi tional freight charges.

The T rial Judge’s con clusion w as based u pon the f act that for ove r a period of e ight y ears, the $200. 00 in frei ght charge s had been added t o the bil l for each conta iner of tires, and defe ndan t’s acq uiesce nce c onstitu ted an enfo rceab le agreement. Additional ly , the Trial Judge conclude d that “ an att empted ret racti on after five y ears t o obtain moni es alr eady pa id for west coast s hipping would be unj ust, ” and1 The original agreem ent provided: 16) This Agree

ment constitu

tes the entire a

greem ent between Com

pany and Dis tributor , and it may

be altered or am

ended only by

written agreem

ent of both parties. 4 defendant byreason of T. C.A. §47-2-209( 5) “would be est opped by i ts waiver of paragraph 16 1 from resorting t o self- help to regain the 1988-1994 west coas t shi pping charges”. The parti es, bytheir acti ons and inact

ions over the peri od of year s and the payment s made, est ablis hed the basi s for the contra ct as found by the Tri al Judge. Next, defendant

assert s that

assuming arguendo the withhol ding of the $22,800.00 was a breach of the di stributorship contrac t, “ such breach was not materi al to the e ssence of t

he contra ct” and shoul d not be hel d to be a material breach. In thi s regar d, the Trial Judge held t hat the non-pay ment defeat ed the object and purpose of what he c onsider ed to be a sa les cont ract, and the bre ach was intent ional a nd defendant gave a s the r eason for non- payment the fact that t he prov ision f or ship ping charg es w as no t set forth in the o riginal c ontrac t. On th is record, the shi pping charge s were an integral part of t he cost of t

he merchandis e and the contract be tween the parties essentiall y r equired s upply ing ti res t o one party and the payment for these tires by t he other. The failure to payfor the merchandise deliv ered aff ord s the selle r a b asis t o ca nce l the c ont ract f or n on- paym ent. See T. C. A. §47-2-703(f

). I n this case, de fendant was advi sed that the non-payment would be treated as a b reach unles s paym ent w as fo rthcom ing, w hich d efen dant a gain re fuse d to pay. We agree with the Trial Judge that this acti on consti tuted a materi al brea ch of the contra ct. Finall y, defendant ar gues that as a matt er of equi ty it had “ performed substant iall y al l of it s contr act with the exception of a mini mal amount,” that i s the $22 ,800 .00 p ayme nt, an d th is bre ach sho uld not for m a bas is to c anc el the con tract . The rule of subs tantial pe rform ance is not ap plicab le to the facts o f this ca se. Th is5

was an ongoing dis tri bution agreement with t he contra ctual relat

ionshi p being dependent upon the timel y del iveryand payment for the mer chandise. Each trans acti on under the a greement was completed upon deli very and payment for the merchandise . The refus al of the defendant t o pay t he full billfor merchandi se, as found by t

he Trial Judge to be l egall y owing t o plaint iff, consti tuted a

basis i n the la w to terminate t

he contra ct, and we find no equit able basi s to t reat t his cont ract ot her than one for the s ale o f m erch and ise, f or w hich the d efe nda nt fa iled t o pa y.

For the for egoing rea sons, we affi rm the judgment of the Tri al Court a nd
rema nd w ith cost o f the a ppea l assess ed to a ppella nt.

__________________________ Herschel P. Franks, J.
CONCUR:

___________________________ Houston M . Goddard, P.J.

___________________________ Don T . McM urray, J.