Weale v. Lund

ENTRY_ORDER.93-384; 162 Vt. 622; 649 A.2d 247

[Filed:  06-Sep-1994]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 93-384

                              MARCH TERM, 1994


 William W. Weale, III             }          APPEALED FROM:
                                   }
                                   }
      v.                           }          Orange Superior Court
                                   }
                                   }
 David R. Lund, Isabel R. Lund     }
 and Nikao Concepts, Inc.          }          DOCKET NO. S241-91 OeC





              In the above entitled cause the Clerk will enter:

      Upon consideration of appellants' motion to reargue, filed May 13, 
 1994, the original entry order dated April 29, 1994, is withdrawn, and the 
 following revised entry is substituted in its place.

      Appellee's motion for collection costs incurred on appeal is granted. 
 The Clerk of the Supreme Court shall tax costs pursuant to V.R.A.P. 39.  
 The cause is remanded to the trial court for determination of reasonable 
 attorney's fees on appeal.

----------------------------------------------------------------------------
 

              In the above entitled cause the Clerk will enter:

      In 1987, defendants David and Isabel Lund incorporated a construction
 company, defendant Nikao Concepts, Inc.  The Lunds were the sole directors
 and shareholders until 1991 when they sold their stock.  Nikao declared
 bankruptcy in January 1992.

      On June 19, 1988, Nikao applied for credit with Connval, Inc., a
 hardware and building supplies business then owned by plaintiff William
 Weale.  The document, entitled "Confidential Credit Application and Credit
 Agreement," was signed by the Lunds under the following language:

           The undersigned hereby agree to pay all bills according
           to the terms of the sale.  We further agree to pay
           interest charges, to the extent allowed by law, for past
           due accounts, and to pay if applicable, all costs of
           collection, including, but not limited to, attorney's
           fees.

           Elsewhere in the agreement, a paragraph provided:

           Please briefly state the intended use for the materials
           purchased from Connval, Inc. and the approximate amount
           of the monthly credit you need.  I.E. "Building
           materials for my remodeling business--$2,000." or
           "Materials for our new addition--$2,000."

 In response, the Lunds wrote they were "looking for a line of $2,000."  The
 agreement authorized three named individuals to charge to the account.

      From June 1988 to August 1989, Nikao's monthly purchases from Connval
 on the account ranged from $5,900 to $31,600 and averaged over $11,000.  In
 connection with these transactions, Connval issued signed invoices and

 

 monthly statements to Nikao showing the status of the account.  These
 invoices and statements set forth the terms of service charges as follows:
 "A maximum service charge of 2% per month will be added to all accounts over
 30 days.  Annual rate of 24%."  The invoices also restated the terms of
 collection costs as set forth in the credit agreement.

       Although individuals other than those named on the agreement were
 charging goods on the account in amounts above $2,000 a month, Nikao never
 complained to Connval.  During this period, Nikao paid Connval on a regular
 basis for goods purchased and service charges, when applicable.  In the
 summer of 1989, Nikao stopped making payments to Connval, and by February
 14, 1990, Nikao owed Connval $37,132.77.  This sum included service charges
 and interest computed according to the terms set in forth in the invoices.
 At that time, the Lunds executed a promissory note in favor of Connval in
 exchange for a cancellation of the accounts receivable.  The note specified
 the principal sum as $37,132.77 "or as much as may be finally determined to
 be due and owing under the Credit Application and Credit Agreement referred
 to herein."

      Under the terms of the note, the Lunds agreed to pay interest on the
 unpaid balance of the note as specified in the agreement.  Beginning March
 14, 1990, interest payments only were to be made monthly to the holder with
 a final payment of all principal and unpaid interest due on February 14,
 1993, or upon the sale of the property secured by the note.  On February 23,
 Connval transferred and assigned this note to Weale, who notified the Lunds
 of the transfer.  Weale received regular monthly payments from March 1990 to
 May 1991, after which no further payments were made.

      Weale brought suit on the note.  The superior court determined the
 amount due and owing under the terms of the Credit Application and Credit
 Agreement, which had been incorporated into the note, and awarded Weale the
 principal sum of $37,132.77; $19,066 in accrued interest at an annual rate
 of 24%; $779.73 in accrued late charges; and $9,196.14 in collection costs,
 for a total of $66,174.64.  The Lunds appeal this award.

      First, the Lunds claim they signed the credit agreement as guarantors,
 not principals, and are therefore only secondarily liable for the
 outstanding debt of Nikao.  On the basis of this claimed guarantor status,
 the Lunds also assert that any modifications in the credit agreement with
 respect to a credit limit or authorized individuals are rendered
 unenforceable by the statute of frauds because they were not in writing.
 See 12 V.S.A. { 181(2) (a special promise to answer for the debt or default
 of another must be in writing to be enforceable); Chomicky v. Buttolph, 147
 Vt. 128, 130, 513 A.2d 1174, 1175 (1986) (modifications made in a contract
 controlled by the statute of frauds are subjected to the same requirements
 of form as the original provisions).  We will not disturb the trial court's
 finding that the Lunds were principals if it is supported by the evidence
 and not clearly erroneous.  Lewis v. Cohen, 157 Vt. 564, 568, 603 A.2d 352,
 353 (1991) (findings of fact will not be disturbed on appeal unless clearly
 erroneous or unsupported by the evidence).  Because the express terms of the
 credit application imposed personal liability on the Lunds, it was not error
 for the court to have concluded that the Lunds were principally liable.

 

 Because the Lunds did not sign as guarantors, the Statute of Frauds is not
 invoked and does not apply to subsequent modifications in the agreement.

      Next, the Lunds assert that their handwritten statement in the credit
 agreement, "we are looking for a line of $2,000," imposed a limitation on
 their liability.  We disagree.  This language cannot be construed as a
 credit ceiling because Nikao consistently purchased goods well in excess of
 this amount.  The  course of the parties' conduct indicates the $2,000 was
 not to be considered by either of them as a limitation.  9A V.S.A. { 2-
 208(1) (course of performance accepted or acquiesced in without objection
 shall be relevant to determine the meaning of the agreement).

      Third, the Lunds argue that their liability is limited to purchases
 made solely by those authorized to charge on the account.  But Nikao did not
 challenge the unauthorized signers nor did it ever complain to Connval.  In
 fact, from September 1988 to July 1989 Nikao paid each month, in full, its
 obligations to Connval without regard to who had made the purchases.  Their
 course of performance here estops them from enforcing a limitation on their
 liability on this ground.  See 9A V.S.A. { 2-208(3) (course of performance
 shall be relevant to show a waiver or modification of any term inconsistent
 with such course of performance).

      Fourth, the Lunds argue the trial court applied the wrong rate of
 interest.  The court applied 24% annual interest (2% per month) as provided
 in the invoices for overdue accounts.  No claim is made that the amount of
 interest was usurious.  The credit agreement did not specify the applicable
 interest rate but did contain the following language: "The undersigned
 hereby agree to pay all bills according to the terms of the sale."
 (Emphasis added.)  From this language, the court incorporated, by reference,
 the interest rate of 2% per month as set forth in the invoices.  Since these
 invoices were signed by Nikao employees when they charged on the account,
 the law of agency binds the Lunds to those terms.  The invoices provided
 that the employee's signature indicated agreement as to the 2% per month
 interest on overdue account balances.  Reference to the invoices does not,
 as the Lunds contend, violate the parole evidence rule.  9A { 2-202 (the
 final expression of the agreement "may be explained or supplemented (a) by
 the course of dealing or usage of trade or by course of performance; and (b)
 by evidence of consistent additional terms . . . .").  There was no error.

      Finally, the Lunds maintain that the trial court's award of $9,196 in
 attorney's fees was excessive.  According to the Lunds, the fees should have
 been a proportional amount of the $2,000 they claim was at stake.  That
 position, however, is not compatible with today's decision.  In any event,
 attorney's fees allowed by the trial court will not be disturbed unless
 there is "'strong evidence of excessiveness or inadequacy.'"  Parker, Lamb &
 Ankuda, P.C. v. Krupinsky, 146 Vt. 304, 307, 503 A.2d 531, 533 (1985)
 (quoting Young v. Northern Terminals, Inc., 132 Vt. 125, 130, 315 A.2d 469,
 472 (1974)).  The trial court, viewing the number of exhibits, the pretrial
 and post-trial documents requested by the court, the length of the hearing
 and the number of legal arguments raised by defendants, found the attorney's
 fees to be reasonable.  Defendants have not demonstrated, nor do we see any

 

 indication, that the award was excessive.  Accordingly, we will not disturb
 it.

      Affirmed.



                                    BY THE COURT:


                                    _______________________________________
                                    Frederic W. Allen, Chief Justice


                                    _______________________________________
                                    Ernest W. Gibson III, Associate Justice


                                    _______________________________________
                                    John A. Dooley, Associate Justice


                                    _______________________________________
                                    James L. Morse, Associate Justice


                                    _______________________________________
                                    Denise R. Johnson, Associate Justice



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