Opinion
Appeal No. 01A01-9703-CH-00125.
November 7, 1997
Appeal From The Chancery Court For Davidson County At Nashville, Tennessee, The Honorable Carol L. McCoy, Chancellor, Davidson Chancery No. 95-3139-II
For the Plaintiff/Appellant:
William B. Bradley
For the Defendant/Appellee:
John S. Anderson
VACATED AND REMANDED
OPINION
This appeal involves a dispute arising out of an oral contract to manufacture compact disks and audio cassettes. The manufacturer filed suit against the purchaser in the Chancery Court for Davidson County seeking payment for undelivered disks and cassettes that were still being held by the manufacturer. The trial court heard the case without a jury and involuntarily dismissed the producer's complaint at the close of its case-in-chief. On this appeal, the manufacturer takes issue with the exclusion of evidence concerning the parties' later credit agreement and with the evidentiary foundation for the trial court's findings concerning the terms of their contract. We have concluded that the trial court overlooked the uncontradicted evidence that the parties modified their original agreement and accordingly vacate the judgment.
I.
CRT Custom Products, Inc. is a Nashville business that manufactures compact disks and audio cassettes. Its customers provide CRT with their artist's master recording, and then CRT subcontracts for the production of the compact disks or audio cassettes. After the disks and cassettes have been recorded, CRT packages the disks and cassettes into a completed product ready for distribution.
Robert Bennett, the owner of Encore Records, was one of CRT's customers. His customary orders were always less then 5,000 units (either disks or cassettes or a combination of both). Since Mr. Bennett had not established credit with CRT, the payment terms of his orders required him to pay fifty percent when he placed the order and to pay the remaining fifty percent when he received the completed disks and cassettes.
Benny Wilson was one of Encore Records' artists. When he began to enjoy some commercial success in early 1995, Mr. Bennett placed an order with CRT for 1,500 more disks and 2,000 more cassettes of Benny Wilson's "Big Stink" album. Since CRT had already received inquiries from distributors about the amount of Benny Wilson products on hand, Larry Nelson, one of CRT's newer outside sales persons, contacted Mr. Bennett about placing a larger order of Benny Wilson disks and cassettes.
Mr. Bennett was interested in purchasing additional disks and cassettes but was concerned about the payment terms and about storing these products prior to distribution. Mr. Nelson told Mr. Bennett that he would receive a price break if he ordered at least 5,000 disks and 5,000 cassettes. After consulting with CRT, he also informed Mr. Bennett that CRT would store the disks and cassettes and that it would drop ship orders for Mr. Bennett at his direction. Mr. Nelson also informed Mr. Bennett that CRT would bill him for the disks and cassettes when they were shipped. On March 23, 1995, Mr. Bennett accepted these terms and ordered 5,000 disks and 5,000 cassettes from Mr. Nelson.
The transaction began to unravel after Mr. Bennett placed his order on March 23, 1995. Mr. Bennett became concerned because CRT had not completed the disks and cassettes by March 31, 1995 as promised. On the other hand, Kevin Wessner, CRT's marketing director, discovered that Mr. Bennett had not provided his usual deposit and requested written confirmation of the order. Mr. Nelson also telephoned Mr. Bennett to inform him that his superiors were not "in total agreement" with the terms of their March 23, 1995 agreement.
Mr. Bennett telephoned Cheryl Hutchinson to arrange for a meeting to resolve these problems, and they agreed to meet in Mr. Bennett's office on April 5, 1995. On April 5, 1995, Mr. Bennett and one of his employees met with Ms. Hutchinson, Mr. Wessner, and Mr. Nelson. Mr. Bennett explained his understanding of his agreement with Mr. Nelson, and Ms. Hutchinson responded that CRT could not do business on that basis because CRT would not be paid for the disks and cassettes if they were never shipped. As an alternative, she offered to provide Mr. Bennett up to ninety days credit on this order and on future orders if he would complete and return a CRT credit application. According to Ms. Hutchinson, Mr. Bennett agreed to her offer and completed and returned CRT's credit application on April 11, 1995.
On several dates in April and May 1995, CRT forwarded invoices to Encore Records totaling $11,159.38. When CRT did not receive payment for its invoices, it filed suit against Mr. Bennett in the Chancery Court for Davidson County. The trial court heard the case without a jury on December 9, 1996, and involuntarily dismissed CRT's complaint at the close of its case-in-chief. The trial court reasoned that the terms of the agreement between Mr. Bennett and Mr. Nelson were "clear from the evidence" and that Mr. Bennett was not required to pay for the disks and cassettes until orders had been placed and shipments had been made.
II.
Exclusion of the Credit Application
We will first consider the trial court's decision to exclude the credit application Mr. Bennett submitted to CRT following the April 5, 1995 meeting. The trial court concluded that this evidence was not relevant with regard to the terms of the March 23, 1995 agreement between Mr. Bennett and Mr. Nelson. This decision strongly suggests that the trial court overlooked one of CRT's principle theories of recovery — that the parties modified their original oral agreement at the April 5, 1995 meeting.
Relevant evidence is evidence that has "any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." Tenn. R. Evid. 401. Evidence need not be dispositive to be relevant; rather, it must make the existence of a material fact more probable or less probable that it would be without the evidence. See Bridges v. CSX Transp., Inc., 845 S.W.2d 760, 764 (Tenn.Ct.App. 1992); Neil P. Cohen et al., Tennessee Law of Evidence § 401.3, at 83 (3d ed. 1995). Relevant evidence is presumptively admissible unless it is rendered inadmissible by another legal rule gleaned from one of the five sources identified in Tenn. R. Evid. 402.
CRT's complaint embodies two alternative theories of recovery. The first theory is that there had been a "miscommunication" between Mr. Bennett and Mr. Nelson and that CRT had never agreed that it would not bill Mr. Bennett for the disks and cassettes covered by the agreement until they were shipped. The second theory of recovery is that Mr. Bennett and Ms. Hutchinson modified the original agreement on April 5, 1995 when they agreed to substitute a ninety-day credit arrangement for the original agreement that Mr. Bennett would not be billed for the disks and cassettes until they were shipped.
The trial court properly concluded that Mr. Bennett's credit application is irrelevant with regard to CRT's first theory of recovery. This evidence sheds no light on the terms of the original agreement between Mr. Bennett and Mr. Nelson. The trial court's decision is, however, incorrect insofar as CRT's second theory of recovery is concerned because Mr. Bennett's contemporaneous completion of the application for credit provides direct evidence substantiating Ms. Hutchinson's testimony that she and Mr. Bennett agreed to substitute the original payment terms of this transaction for the credit terms contained in the credit application. In the words of Tenn. R. Evid. 401, the proof concerning the circumstances surrounding the submission of the application for credit renders Ms. Hutchinson's testimony concerning her April 5, 1995 agreement with Mr. Bennett more probable. Accordingly, the trial court incorrectly excluded the evidence of Mr. Bennett's application for credit on relevancy grounds.
III.
The Involuntary Dismissal
We now turn to the trial court's decision to dismiss CRT's complaint pursuant to Tenn. R. Civ. P. 41.02(2) at the close of its case-in-chief. Like its decision to exclude Mr. Bennett's credit application, the trial court's decision indicates that it overlooked CRT's second theory of recovery. Based on our review of the evidence, the trial court should not have dismissed CRT's contractual claim because of Ms. Hutchinson's uncontradicted testimony that she and Mr. Bennett agreed on April 5, 1995 to replace the payment terms of the original agreement with the credit arrangement embodied in the credit application.
A.
A Tenn. R. Civ. P. 41.02(2) motion tests the strength of the plaintiff's case. See Merriman v. Smith, 599 S.W.2d 548, 560 (Tenn.Ct.App. 1979). A complaint should be dismissed in response to a Tenn. R. Civ. P. 41.02(2) motion only if, based on the law and the facts in evidence, the plaintiff has failed to demonstrate a right to the relief being sought. See City of Columbia v. C.F.W. Constr. Co., 557 S.W.2d 734, 740 (Tenn. 1977). When a Tenn. R. Civ. P. 41.02(2) motion is filed, the trial court must impartially weigh and evaluate the plaintiff's evidence just as it would at the conclusion of all the evidence and must deny the motion if the plaintiff has made out a prima facie case by a preponderance of the evidence. See Harrogate Corp. v. System Sales Corp., 915 S.W.2d 812, 818 (Tenn.Ct.App. 1995); Smith v. Inman Realty Co., 846 S.W.2d 819, 822 (Tenn.Ct.App. 1992).
On appeal from a Tenn. R. Civ. P. 41.02(2) dismissal, we must review the evidence de novo and must presume that the trial court's factual findings are correct unless the evidence preponderates otherwise. See Catt v. Catt, 866 S.W.2d 570, 574 (Tenn.Ct.App. 1993); Willowbrook Home Health Care Agency, Inc. v. Willow Brook Retirement Ctr., 769 S.W.2d 862, 865 (Tenn.Ct.App. 1988). We need not, however, presume that the trial court's resolution of disputed factual issues is correct when the trial court makes no factual findings. See Devorak v. Patterson, 907 S.W.2d 815, 818 (Tenn.Ct.App. 1995).
B.
The pleadings frame the parties' dispute over whether Mr. Bennett and Ms. Hutchinson amended the original agreement at their April 5, 1995 meeting. CRT's complaint alleges that the parties modified their agreement during the April 5, 1995 meeting; while Mr. Bennett's answer denies that he intended for the credit application to modify his original agreement with Mr. Nelson. Since these allegations are not evidence, see Hillhaven Corp. v. State ex rel. Manor Care, Inc., 565 S.W.2d 210, 212 (Tenn. 1978); State v. Draper, 800 S.W.2d 489, 493 (Tenn.Crim.App. 1990), we must turn to the proof introduced at trial to determine whether CRT made out a prima facie case that the parties modified the original agreement sufficient to withstand a Tenn. R. Civ. P. 41.02(2) motion.
The existence of a modification to a contract must be established the same way as establishing any other contract. See 6 Arthur Corbin, Corbin on Contracts § 1293, at 188 (1962). The party seeking to make out a prima facie case that a contract has been modified must prove the contracting parties' mutual assent to the modification, see Batson v. Pleasant View Util. Dist., 592 S.W.2d 578, 582 (Tenn.Ct.App. 1979), and musts prove that the modification was supported by adequate consideration. See Bonastia v. Berman Bros., 914 F. Supp. 1533, 1538 (W.D. Tenn. 1995). If the modification is in writing signed by the party to be charged, the writing itself constitutes prima facie evidence of consideration. Tenn. Code Ann. § 47-50-103 (1995); Atkins v. Kirkpatrick, 823 S.W.2d 547, 552 (Tenn.Ct.App. 1991).
Ms. Hutchinson testified that she told Mr. Bennett during their April 5, 1995 meeting that CRT would not do business with him on the terms offered by Mr. Nelson.
She offered to replace the "billing-on-shipment" arrangement with a "ninety-day-credit" arrangement and requested Mr. Bennett to complete and return a credit application if he wished to do business on these new terms. Ms. Hutchinson also testified that Mr. Bennett agreed to the new credit terms after expressing confidence that Benny Wilson's album would continue to be popular.
Mr. Bennett's attorney undertook to prove that the credit application completed by Mr. Bennett after the April 5, 1995 meeting did not apply to the contract at issue in this case. He was not successful. When he cross-examined Ms. Hutchinson on this point, she testified specifically that the parties agreed that the new credit terms would apply to the present order as well as to future orders. Mr. Bennett was also called as an adverse witness during CRT's case-in-chief. While he testified at some length about the terms of his original agreement with Mr. Nelson, he did not testify, either on direct or cross-examination, about whether the parties agreed to modify the original payment terms of the transaction at their April 5, 1995 meeting.
Mr. Bennett's testimony left uncontradicted Ms. Hutchinson's testimony that the parties modified the payment terms of the order on April 5, 1995. Testimony that is uncontradicted or not otherwise discredited must be accepted as true, see Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 30, 151 S.W. 1030, 1036 (1912); Phillips-Buttorff Mfg'g Co. v. McAlexander, 15 Tenn. App. 618, 627 (1932), and the fact-finder may not arbitrarily refuse to consider it. See Biggs v. Johnson, 1 Tenn. Cas. (Shannon) 622, 628 (1876); Walters v. Staton, 21 Tenn. App. 401, 407, 111 S.W.2d 381, 384 (1937).
By focusing so intently on the terms of the March 23, 1995 agreement between Mr. Bennett and Mr. Nelson, the trial court overlooked the fact that CRT had made out a prima facie case that Mr. Bennett had breached the oral agreement as modified on April 5, 1995. In evaluating the strength of CRT's case in response to Mr. Bennett's Tenn. R. Civ. P. 41.02(2) motion, the trial court was not free to ignore Ms. Hutchinson's uncontradicted testimony that the parties agreed on April 5, 1995 that their agreement would be subject to the terms in CRT's credit application. Accordingly, the evidence, as it existed at the close of CRT's case-in-chief, preponderates against the trial court's conclusion that the parties' contract was governed by the terms agreed to by Mr. Bennett and Mr. Nelson on or before March 23, 1995.
Ms. Hutchinson's testimony on this point takes on additional weight when it is corroborated by the evidence relating to the credit application Mr. Bennett completed and returned following the April 5, 1995 meeting. The parties' contemporaneous conduct has more probative force than their later contrary protestations made during the course of a legal dispute.
IV.
We vacate the judgment dismissing CRT's complaint against Mr. Bennett and remand the case to the trial court for further proceedings consistent with this opinion. We tax the costs of this appeal to Robert O. Bennett for which execution, if necessary, may issue.
_____________________________ WILLIAM C. KOCH, JR., JUDGE
CONCUR:
_________________________________ HENRY F. TODD, PRESIDING JUDGE
_________________________________ BEN H. CANTRELL, JUDGE