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Food Lion v. Finazzle

North Carolina Court of Appeals
Apr 1, 2008
189 N.C. App. 530 (N.C. Ct. App. 2008)

Opinion

No. 07-1029.

Filed April 1, 2008.

Wake County No. 05CVS13455.

Appeal by defendant from judgment entered 16 February 2007 by Judge Carl R. Fox in Wake County Superior Court. Heard in the Court of Appeals 20 February 2008.

The Law Office of John T. Benjamin, Jr., P.A., by John T. Benjamin, Jr., for plaintiff-appellee. The Law Offices of Robert O. Jenkins, by Robert O. Jenkins, for defendant-appellant.


Finazzle Corporation U.S.A. ("defendant") appeals from an order of the trial court entered 16 February 2007 granting a directed verdict in favor of Food Lion, LLC ("plaintiff"). For the following reasons, we affirm.

Defendant is a Georgia-based company that manufactures and distributes cleaning products, including Finazzle Tile and Grout Cleaner. Defendant is owned by Peter D. Finazzo, Jr. ("Finazzo"), who serves as the chief executive officer and president of defendant. Plaintiff, a limited liability company authorized to transact business in North Carolina, operates numerous grocery stores throughout North Carolina and other Southeastern and Mid-Atlantic states.

Prior to March 2004, Finazzo, on behalf of defendant, entered into various broker's agreements with Crossmark, Inc. ("Crossmark"), pursuant to which Crossmark agreed to assist defendant in securing placement of defendant's products in specified retail stores. Through such broker's agreements, Crossmark represented defendant, at various times, in North Carolina, South Carolina, Florida, and parts of Tennessee and Georgia. Crossmark successfully secured entry of defendant's products in several retail stores, including Harris Teeter, Piggly Wiggly, Ingles, and Bi-Lo. After securing entry of defendant's product in the various retail stores, Crossmark was responsible for performing store-level support and being defendant's "eyes and ears" in the stores. In return, Crossmark was to receive a five percent commission on resulting sales.

On 18 March 2004, Grayson Bates ("Bates"), a broker employed by Crossmark, signed a new item agreement ("the Agreement") with plaintiff, purportedly on defendant's behalf. Pursuant to the Agreement, defendant agreed to pay a $40,000.00 new item fee to secure entry of Finazzle Tile and Grout Cleaner onto plaintiff's shelves. The Agreement granted plaintiff the authority to discontinue Finazzle Tile and Grout Cleaner if "at any time customer demand for [Finazzle Tile and Grout Cleaner] falls below expectations, as determined by [plaintiff] in its sole discretion." The Agreement also provided that defendant agreed to (1) "accept returns of the discontinued or otherwise non merchantible [sic] item(s) from [plaintiff's] warehouses and Reclamation Centers and to pay [plaintiff] for the returned item(s)"; and (2) "pay [plaintiff] for any items processed through its Reclamation Centers." Pursuant to an "Unsaleable Chute Change Form" ("Reclaim Form") executed as part of the Agreement, a $0.28 per item fee would be charged to defendant for plaintiff's scanning, packaging, and disposing of defendant's products processed through the reclaim program.

On 29 September 2005, plaintiff filed a complaint against defendant, alleging that defendant breached the terms of the Agreement by failing to compensate plaintiff in accordance with the Reclaim Form. On 31 July 2006, the trial court denied plaintiff's motion for summary judgment, and the case proceeded to trial on 11 December 2006. At the close of all the evidence, the trial court granted plaintiff's motion for directed verdict, ruling, inter alia, that plaintiff had proved that defendant was liable on the Agreement pursuant to the agency doctrines of actual authority, apparent authority, and ratification. On 16 February 2007, the trial court entered judgment in plaintiff's favor, and defendant filed timely notice of appeal.

"This Court reviews a trial court's grant of a motion for directed verdict de novo." Herring v. Food Lion, LLC, 175 N.C. App. 22, 26, 623 S.E.2d 281, 284 (2005), aff'd, 360 N.C. 472, 628 S.E.2d 761 (2006) (per curiam). "A motion for directed verdict `tests the legal sufficiency of the evidence, considered in the light most favorable to the nonmovant, to take the case to the jury.'" Miller v. B.H.B. Enters., Inc., 152 N.C. App. 532, 537, 568 S.E.2d 219, 223 (2002) (quoting N. Nat'l Life Ins. v. Miller Mach. Co., 311 N.C. 62, 69, 316 S.E.2d 256, 261 (1984)). We must determine "whether, upon examination of all the evidence in the light most favorable to the nonmoving party, and that party being given the benefit of every reasonable inference drawn therefrom, the evidence [wa]s sufficient to be submitted to the jury." Brookshire v. N.C. Dep't of Transp., 180 N.C. App. 670, 672, 637 S.E.2d 902, 904 (2006) (internal quotation marks and citation omitted). Although "the granting of a directed verdict in favor of the party with the burden of proof will be more closely scrutinized than otherwise," N.C. Nat'l Bank v. Burnette, 38 N.C. App. 120, 124, 247 S.E.2d 648, 651 (1978), rev'd on other grounds, 297 N.C. 524, 256 S.E.2d 388 (1979), "[t]he test thus applied is one of looking at all of the evidence and if `no other reasonable conclusion is possible' then a directed verdict would be proper even though such directed verdict is in favor of the litigant upon whom rests the burden of proof." Smith v. Burleson, 9 N.C. App. 611, 613, 177 S.E.2d 451, 452 (1970); see also Miller v. Barber-Scotia College, 167 N.C. App. 165, 167, 605 S.E.2d 474, 476 (2004) ("A `directed verdict is mandated where the facts and the law will reasonably support only one conclusion.'" (quoting McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 356, 112 L. Ed. 2d 866, 883 (1991))). It is well-established that a principal is liable on a contract with a third party when (1) his or her agent acts within the scope of the agent's actual authority; (2) his or her agent acts within the scope of the agent's apparent authority, provided that the third party does not have notice that the agent is exceeding the scope of the agent's actual authority; or (3) he or she ratifies the contract. See Inv. Props. of Asheville, Inc. v. Allen, 283 N.C. 277, 285.86, 196 S.E.2d 262, 267 (1973). In the instant case, the trial court granted a directed verdict in favor of plaintiff based upon actual authority, apparent authority, and ratification. Therefore, if the trial court properly directed a verdict on any of these three grounds, the court's order must be affirmed.

"[A]ctual authority . . . is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal's manifestations of consent to him." Heath v. Craighill, Rendleman, Ingle Blythe, P.A., 97 N.C. App. 236, 241, 388 S.E.2d 178, 181 (internal quotation marks and citation omitted), disc. rev. denied, 327 N.C. 428, 395 S.E.2d 678 (1990).

"`[A]pparent authority is that authority which the principal has held the agent out as possessing or which he has permitted the agent to represent that he possesses.'" Ward v. Durham Life Ins. Co., 325 N.C. 202, 212, 381 S.E.2d 698, 703 (1989) (emphasis omitted) (quoting Investors Title Ins. Co. v. Herzig, 320 N.C. 770, 773.74, 360 S.E.2d 786, 788.89 (1987)).

In the case sub judice, the trial court ruled as a matter of law that plaintiff established, inter alia, that defendant had ratified the Agreement. As our Supreme Court has explained, "[w]here a principal accepts the benefits of unauthorized acts of his alleged agent, with knowledge that the agent was acting on his behalf, the principal thereby ratifies such acts and is bound thereby." C.C. Walker Grading Hauling, Inc. v. S.R.F. Mgmt. Corp., 311 N.C. 170, 182, 316 S.E.2d 298, 305 (1984). "Ratification is based upon the plain principle of honesty that a party cannot retain the benefits and escape the burdens of an act done by an unauthorized agent." Hooper v. Merchs.' Bank Trust Co., 190 N.C. 423, 427, 130 S.E. 49, 52 (1925). "Ratification is implied when the conduct of the principal constitutes an assent to the act in question," Patterson v. Merrill Lynch, Pierce, Fenner Smith, Inc., 266 N.C. 489, 493, 146 S.E.2d 390, 393 (1966), and

is defined as the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him. Ratification requires intent to ratify plus full knowledge of all material facts. Ratification may be express or implied, and intent may be inferred from failure to repudiate an unauthorized act or from conduct on the part of the principal which is inconsistent with any other position than intent to adopt the act.

Bell Atl. Tricon Leasing Corp. v. DRR, Inc., 114 N.C. App. 771, 776.77, 443 S.E.2d 374, 377 (1994) (internal quotation marks, citations, and alteration omitted). Ultimately, in order "[t]o constitute ratification as a matter of law, the conduct must be consistent with an intent to affirm the unauthorized act and inconsistent with any other purpose." Am. Travel Corp. v. Cent. Carolina Bank Trust Co., 57 N.C. App. 437, 443, 291 S.E.2d 892, 896, disc. rev. denied, 306 N.C. 555, 294 S.E.2d 369 (1982). Defendant concedes in his brief that plaintiff presented circumstantial evidence of ratification, but argues that "circumstantial evidence is not an appropriate basis for the trial court to take this issue from the jury." However, "circumstantial evidence is merely direct evidence indirectly applied," State v. Blackwelder, 182 N.C. 899, 904, 109 S.E. 644, 647 (1921), and "`the law does not distinguish between the weight given to direct and circumstantial evidence.'" State v. Berry, 356 N.C. 490, 500, 573 S.E.2d 132, 140 (2002) (quoting State v. Parker, 354 N.C. 268, 279, 553 S.E.2d 885, 894 (2001), cert. denied, 535 U.S. 1114, 153 L. Ed. 2d 162 (2002)).

The facts in the instant case show that Chad Clark ("Clark") initially was the Crossmark broker who worked with defendant after Finazzo authorized Crossmark to represent defendant with respect to Harris Teeter. At the time, Grayson Bates ("Bates") "was the Food Lion point guy" for Crossmark. Bates testified that Clark, who was Bates' "team leader," spoke directly with Finazzo and that Finazzo gave Crossmark "the agreement to move forward at Food Lion." Bates explained, "From that point, I take over, it's my account."

Bates then began negotiating with Michael Alves ("Alves"), plaintiff's category manager for paper products and detergents. Bates testified that he informed Alves that defendant would pay a $20,000.00 new item fee to secure entry of Finazzle Tile and Grout Cleaner into plaintiff's stores. Bates testified that he knew that plaintiff's standard slotting fee was $40,000.00, but he offered half "just to test the waters" in an effort to save defendant money. He then testified, without objection, "[Alves] told me he wouldn't accept it for that, so I contacted [Finazzo], [Finazzo] authorized me . . . to change it to $40,000. And that's what we did, and I changed it."

Bates' testimony is supported by the Agreement itself, on which a typewritten "$20,000" for the "new item allowance" was crossed out in pen and "$40,000" was handwritten in ink. Additionally, defendant's responses to plaintiff's first set of interrogatories confirms the existence and essential substance of this conversation:

Defendant believes he began dealing with Crossmark sometime in 2003. In early 2004 Crossmark secured and attended an initial meeting with Harris Teeter. Defendant's contact at Crossmark was Chad (last known [sic] not known), who Defendant believes is no longer with Crossmark. Grayson Bates, another Crossmark employee, called Defendant sometime in 2004 and informed Defendant that Food Lion was interested in carrying Defendant's product in Food Lion stores. Bates informed Defendant that Food Lion wanted $25 per store for slotting. Defendant agreed to pay that sum if Food Lion agreed that it would be taken off invoice.

(Emphasis added). At trial, Finazzo denied authorizing Bates during the course of their conversation to negotiate with plaintiff concerning Finazzle Tile and Grout Cleaner. However, defendant made no motion to amend its responses to the interrogatories, and the "purpose [of Rule 33 of the Rules of Civil Procedure] cannot be served if a party is allowed to return written answers to which he has sworn — and on which the opposing party is entitled to rely — and then effectively disaffirm those answers at trial." Hunter v.Spaulding, 97 N.C. App. 372, 376, 388 S.E.2d 630, 633 (1990); see also Belcher v. Fleetwood Enters., Inc., 162 N.C. App. 80, 86, 590 S.E.2d 15, 19 (2004) (noting that a non-moving party cannot create an issue of fact simply by contradicting his or her own sworn testimony); Rollins v. Junior Miller Roofing Co., 55 N.C. App. 158, 162, 284 S.E.2d 697, 700 (1981) ("Evidence offered in denial of the admitted fact should undoubtedly be rejected." (internal quotation marks and citation omitted)).

With respect to the reclaim terms of the Agreement, Bates testified that this particular arrangement was the most common and least costly option. Additionally, Dwight Holland ("Holland") — Crossmark's division manager responsible for defendant's account — testified that all major retailers he knew included in their new item agreements a similar reclaim program. Holland further testified that Harris Teeter had such a reclaim program and that Harris Teeter charged a fee as part of its program.

Bates testified that he called Finazzo immediately after the Agreement was executed, and gave Finazzo a forecast of the likely size of plaintiff's initial order of Finazzle Tile and Grout Cleaner. Bates explained, "Having dealt with [plaintiff], I know that they buy a case and a half per store for new items, which their numbers count up to 1,800 cases." Bates was concerned whether defendant would be able to fill such an initial order since, according to Bates, "Mr. Finazzo is, and at that time was, basically a one man operation." Bates testified that he called to inquire whether Finazzo would be able to satisfy an order for 1,800cases of Finazzle Tile and Grout Cleaner, and Finazzo "said he could, no problem." Bates further testified that as the date for filling the order approached, he called Finazzo again to confirm that defendant would be able to fill plaintiff's initial order.

Bates further testified that plaintiff publishes a weekly spreadsheet listing new items and deleted items. On the one-page new item authorization sheet for 26 March 2004, Finazzle Tile and Grout Cleaner was listed as one of the items authorized for distribution to plaintiff, with Alves listed as the corresponding category manager. Bates testified that this new item authorization sheet was sent to defendant. In addition, Bates testified that Vic Gisonna ("Gisonna"), Bates' immediate manager, sent an email to Holland and Bates on 29 March 2004, stating "Great job. I can't wait to see the opening order." Holland replied by email to both Gisonna and Bates, writing "Grayson, GREAT JOB!!!!" Defendant was copied on both emails. Finazzo acknowledged receipt of the emails, but denied reading or even noticing the attached new item authorization sheet.

After execution of the Agreement, plaintiff began ordering cases of Finazzle Tile and Grout Cleaner from defendant. Defendant filled these orders, and plaintiff paid all invoices owing to defendant, including: $119,237.23 on 19 April 2004, $13,102.99 on 20 April 2004, $24,895.69 on 10 May 2004, $5,241.20 on 17 May 2004, $73,667.93 on 20 May 2004, and $106,643.80 on 24 May 2004.

Defendant's "Cash Receipts Journal" for the period from 1 April 2004 to 30 April 2004 lists the payments from 19 April and 20April 2004. The total amount of these two payments was $132,340.22, and Finazzo added in his handwriting to the document: "Net 132,340.22," "Slotting not yet taken," and "132.340.22 X 5% = 6617.01." As noted supra, Crossmark's commission was five percent on net sales, and the slotting fee was the $40,000.00 new item fee defendant was to pay plaintiff for the placement of Finazzle Tile and Grout Cleaner on plaintiff's shelves.

By check dated 19 May 2004, defendant paid Crossmark $7,613.34, which was itemized as $996.33 for "HT" and $6,617.01 for "FL" — the same amount calculated on defendant's "Cash Receipts Journal" in Finazzo's handwriting. Holland testified, without objection, that the "HT" and "FL" denote Harris Teeter and plaintiff, respectively. Also written on the check was "Sheila/Gwen/Grayson." When asked if he knew "Sheila," "Gwen," or "Grayson," Holland testified, without objection, that "Sheila Leonard was the administrator at that time on the Finazzle organization.

Gwen Bain is actually at the office, main office in Greenville, South Carolina and Grayson was the account executive representing Finazzle Corporation at Food Lion." Plaintiff first invoiced defendant for the $40,000.00 slotting or new item fee on 5 April 2004, but defendant made no payment at that time. This original invoice expressly listed Crossmark as the broker on the account, and defendant never informed plaintiff that Crossmark was not its broker. In an invoice accompanying a check on 1 June 2004, plaintiff noted that it was deducting $30,131.88 of the $40,000.00 slotting fee from the $30,136.88 that it owed defendant, resulting in a net payment of $5.00 to defendant. Defendant deposited the $5.00 check without objection. In an invoice accompanying a check on 28 June 2004, plaintiff noted that it was deducting $8,511.94 of the balance of the original $40,000.00 new item fee from the $8,516.94 that it owed defendant, resulting in another $5.00 payment. Defendant deposited this second $5.00 check without objection. Finally, in an invoice accompanying a check dated 23 August 2004, plaintiff noted that it was deducting $1,356.18 — the balance of the original $40,000.00 new item fee — from the amount that it owed defendant. Plaintiff also deducted several reclaim charges from the amount that it owed defendant, including charges of $19.41, $278.21, $129.40, $323.50, $90.58, $226.45, $155.28, and $258.80. After all the deductions, defendant received a net payment of $8,299.74, and defendant deposited the check without objection.

The only place where the new item fee and reclaim charges were set out was in the Agreement, and defendant failed to object to any of the multiple deductions over a period of several months for the new item fee and reclaim charges. However, beginning in March 2005, plaintiff sent invoices to defendant for reclaim charges, since plaintiff discontinued carrying Finazzle Tile and Grout Cleaner. There were no payments owed defendant from which plaintiff could deduct the reclaim charges because of the discontinuation. Defendant refused to pay the reclaim charges, and on 29 September 2005, plaintiff filed suit. In support of its argument against the existence of a contract between plaintiff and defendant, defendant contends that Finazzo did not sign the Agreement and did not see the Agreement until being served with plaintiff's complaint. Finazzo testified that his relationship with Bates began only after Clark was fired and Bates informed him that he "was going to be temporarily managing the Harris Teeter account until [Crossmark] hired a new guy." Defendant also argues that Finazzo was the only person with authority to make decisions that would bind the company and that he (1) never had direct contact with either Alves or Holland; (2) never read the attachment to the congratulatory emails from Gisonna or Holland that listed Finazzle Tile and Grout Cleaner as a new product in plaintiff's stores; and (3) failed to notice the reclaim deductions on the invoices from plaintiff, stating "I was just going through the stack of paperwork and going through the motions. And if you were in my office for one day a week, you [sic] see how busy we are. And I made a mistake, I said, I'm not going to say it again." Ultimately, defendant contends the evidence shows only that it sold Finazzle Tile and Grout Cleaner to plaintiff pursuant to individual purchase orders. Defendant's contention is without merit.

Defendant employed Crossmark as a broker with respect to other retailers that had similar reclaim arrangements, and in fact, defendant agreed to similar reclaim charges when he signed a new item agreement with Harris Teeter. Defendant admitted in discovery that he authorized Crossmark to negotiate for the entry of FinazzleTile and Grout Cleaner into plaintiff's stores. Further, by accepting deductions for reclaim charges, defendant effectively made payments pursuant to an agreement that he now denies. The only document that explained these charges was the Agreement.

As our Supreme Court has held, a trial court may "direct a verdict for the party with the burden of proof where the credibility of [the] movant's evidence is manifest as a matter of law." N.C. Nat'l Bank v. Burnette, 297 N.C. 524, 537, 256 S.E.2d 388, 396 (1979) (emphasis omitted); see also McLean v. Sale, 54 N.C. App. 538, 543, 284 S.E.2d 160, 163 (1981) ("Plaintiff's right to recover does not depend upon the credibility of her witnesses."). Although defendant emphasizes that he never saw the Agreement and was ignorant of its exact terms, "[e]ven the ostrich, believe it or not, no longer buries his head in the sand." Murray v. Atl. Coast Line R.R. Co., 218 N.C. 392, 411, 11 S.E.2d 326, 338 (1940) (Seawell, J., dissenting). Therefore, assuming arguendo that Bates and Crossmark were unauthorized to act on defendant's behalf in executing the Agreement, defendant's conduct nevertheless was "consistent with an intent to affirm the unauthorized act and inconsistent with any other purpose." Am. Travel Corp., 57 N.C. App. at 443 , 291 S.E.2d at 896. Accordingly, defendant's assignment of error is overruled.

Because we affirm the trial court's ruling with respect to ratification and hold that the trial court properly found defendant liable on the Agreement, we need not address defendant's remaining arguments concerning the issues of actual and apparent authority. Additionally, defendant limits his argument on appeal to whether the trial court properly found that a contract existed and fails to argue that the trial court erred in finding a breach of that contract; therefore, we need not address whether the trial court properly found that defendant breached the Agreement. See N.C. R. App. P. 10(a), 28(a), 28(b)(6) (2007).

Affirmed.

Judges HUNTER and BRYANT concur.

Report per Rule 30(e).


Summaries of

Food Lion v. Finazzle

North Carolina Court of Appeals
Apr 1, 2008
189 N.C. App. 530 (N.C. Ct. App. 2008)
Case details for

Food Lion v. Finazzle

Case Details

Full title:FOOD LION, LLC v. FINAZZLE CORP. U.S.A

Court:North Carolina Court of Appeals

Date published: Apr 1, 2008

Citations

189 N.C. App. 530 (N.C. Ct. App. 2008)