Opinion ID: 1118080
Heading Depth: 1
Heading Rank: 4

Heading: Allied's Breach-of-Contract and Fiduciary-Duty Claims

Text: The trial court entered a JML for Allied on its claims of breach of contract and breach of fiduciary duty. Edwards requests a new trial on both of those claims. This Court reviews de novo the grant or denial of a motion for a JML, determining whether there was substantial evidence, when viewed in the light most favorable to the nonmoving party, to produce a factual conflict warranting jury consideration. Alfa Life Ins. Corp. v. Jackson, 906 So.2d 143, 149 (Ala.2005) (citing Ex parte Helms, 873 So.2d 1139, 1143-44 (Ala.2003)). [S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved. West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989). The evidence supporting the JML for Allied on its breach-of-contract and breach-of-fiduciary-duty claims is largely uncontested. [15] Edwards was obligated under paragraph 2.8 of the agreement to send the corporate office all checks payable to Allied that were generated from closings and to hold all such moneys in trust for Allied. Her retention of checks, failure to report loan closings, direct payment of branch-operating expenses, and opening of a bank account in Allied's name were clear violations of the agreement. Edwards's defense to Allied's breach-of-contract and breach-of-fiduciary-duty claims was that Allied breached first, and it therefore could not afterwards enforce the agreement against Edwards. [16] See Gray v. Reynolds, 553 So.2d 79, 82 (Ala.1989) (a court should not enforce a contract when the party seeking enforcement failed to perform his part of the agreement). Stated differently, Edwards argues that Allied's breach excused her own nonperformance. See Nationwide Mut. Ins. Co. v. Clay, 525 So.2d 1339, 1343 (Ala.1987) (a substantial breach by one party [to a contract] excuses further performance by the other). The trial court rejected Edwards's defense. Even assuming that Allied breached the agreement beginning in the late 1990s, the trial court concluded that, at that time, Edwards must have either (a) repudiated the agreement and sued for Allied's breach, or (b) continued the agreement but waived any claim against Allied for its purported breach. Edwards did not repudiate the agreement when Allied purportedly breached. Ruling that Edwards had waived her right to sue Allied for its breach by not repudiating the agreement, the trial court determined that Edwards had no defense to Allied's claims alleging breach of contract and breach of fiduciary duty. Absent that defense, the trial court entered a JML on Allied's breach-of-contract claim and submitted the related question of compensatory damages to the jury. As damages for Allied's breach-of-contract claim, the jury awarded $308,369 for litigation expenses incurred by Allied. [17] The Restatement (Second) of Contracts discusses two separate questions that arise if one party breaches its obligations under a contract in which the parties have promised to exchange performances. The first is whether the injured party is excused from performing his duties following the breach. If the defaulting party materially breaches its duties, the injured party may repudiate the agreement and not perform prospectively. See Restatement (Second) of Contracts, Ch. 10, intro. n. (1981) (the injured party is justified in not performing his own obligations if the other party materially fails to perform); Smith v. Clark, 341 So.2d 720, 721 (Ala.1977) (court did not enforce boundary-line agreement against the plaintiff where the defendant failed to honor his part of that agreement to move a structure off the disputed area). In lieu of repudiation following a material breach by the other party, the injured party may elect to continue the contract and retain its economic benefits. See Restatement § 246, cmt. c, illus. 3. The second question is whether the injured party may claim damages for the breach. Contrary to the trial court's ruling, the injured party is not required to repudiate the contract in order to preserve its right to sue the other for breach of the contract. See Restatement, Ch. 10, intro. n. (parties ordinarily desire and bargain for performance by the defaulting party rather than a lawsuit). After a breach the injured party may elect to continue the agreement and claim damages from the defaulting party for his nonperformance. See Restatement § 246, cmt. b (injured party's acceptance of defective performance from the defaulting party does not preclude recovery of damages for the breach). When the parties have exchanged promises of performances, however, the injured party is not excused from performing his remaining duties if he continues the agreement with knowledge of the default by the breaching party. `A plaintiff cannot simultaneously claim the benefits of a contract and repudiate its burdens and conditions.' Southern Energy Homes, Inc. v. Gregor, 777 So.2d 79, 82 (Ala.2000) (quoting Southern Energy Homes, Inc. v. Ard, 772 So.2d 1131, 1134 (Ala.2000)). As stated in § 246 of the Restatement, an obligor's acceptance or his retention for an unreasonable time of the obligee's performance, with knowledge or reason to know of the [obligee's failure to perform], operates as a promise to perform in spite of that non-occurrence. . . . Edwards continued the agreement and received its financial benefits for approximately four years after she learned of Allied's purported nonperformance. Having made that election, Edwards was not excused from performing her own obligations under the agreement. See Restatement § 246. The evidence is undisputed that, following Allied's purported breach, Edwards did not send all closing checks to Allied, failed to hold Allied's funds in trust, opened a bank account in Allied's name, and directly paid branch-operating expenses from her d/b/a account. Edwards's argument that Allied breached first did not excuse her nonperformance where, as here, she accepted the benefits of the agreement with knowledge of Allied's alleged breach. [18] Accordingly, the trial court did not err when it entered a JML in favor of Allied on its breach-of-contract and breach-of-fiduciary-duty claims. Further, the judgment awarding Allied $308,369 in compensatory damages on its breach-of-contract claim is affirmed.