Munchak Corp. v. Caldwell , 46 N.C. App. 414 ( 1980 )

265 S.E.2d 654 (1980)

The MUNCHAK CORPORATION (DELAWARE) and RDG Corporation, a joint venture d/b/a The Carolina Cougars and The Munchak Corporation (Georgia)
v.
Joe L. CALDWELL.

No. 7918SC814.

Court of Appeals of North Carolina.

May 6, 1980.

Brooks, Pierce, McLendon, Humphrey & Leonard by Hubert Humphrey, Edward C. Winslow III, and Paul E. Marth, Greensboro, Powell, Goldstein, Frazer & Murphy by Frank Love, Atlanta, Ga., for plaintiff-appellant Munchak Corp. (Delaware).

Younce, Wall & Chastain by Percy L. Wall, Greensboro, for plaintiff-appellant Munchak Corp. (Georgia).

Smith, Moore, Smith, Schell & Hunter by Bynum M. Hunter, James L. Gale, Jeri L. Whitfield and Alan W. Duncan, Greensboro, for defendant-appellee.

HILL, Judge.

At the trial on defendant's counterclaim for specific performance, the trial court allowed defendant to introduce into evidence the entire record from the earlier hearing on plaintiffs' claim for reformation. Plaintiffs contend the court's action was in error.

It is clear that in most circumstances, testimony from a former trial is hearsay and inadmissible in a subsequent trial. "[P]reviously recorded testimony is authorized if it be shown that: (1) The witness is unavailable; (2) the proceedings at which the testimony was given was a former trial of the same cause, or a preliminary stage of the same cause, or the trial of another cause involving the issue and subject matter at which the testimony is directed; and (3) the current defendants were present at that time and represented by counsel." (Citations omitted.) State v. Smith, 291 N.C. 505, 524, 231 S.E.2d 663, 675 (1977).

In the case sub judice, however, we are presented with an exception. It is important to remember that there was only one action. The complaint and counterclaim were filed in the same lawsuit and constitute two parts of the same action. Both claims were heard in the superior court. If the claim had been heard on the same day, the parties and the judge would have been cognizant of and able to rely on evidence presented on the claim for reformation.

The record from the prior reformation hearing was properly admitted. To hold otherwise would be to destroy the ability of trial judges to exercise discretion by severing complicated cases into more understandable issues. Plaintiffs' first assignment of error is overruled.

Plaintiffs argue the trial court erred by decreeing specific enforcement of paragraphs 5(a) and 5(b) of the October 30, 1970 contract between the parties. Plaintiffs state several grounds for their position. The sole function of the equitable remedy of specific performance is to compel a party to do that which in good conscience he ought to do without court compulsion. Bell v. Concrete Products, Inc., 263 N.C. 389, 390, 139 S.E.2d 629, 630 (1965). The remedy rests in the sound discretion of the trial court, Bradshaw v. Millikin, 173 N.C. 432, 92 S.E. 161 (1917); and is conclusive on appeal absent a showing of a palpable abuse of discretion. Highway Commission v. Hemphill, 269 N.C. 535, 153 S.E.2d 22 (1967).

Paragraph 5 of the contract states that:

At the time of the rendering of services to Club by Player, Player shall be eligible for and shall receive entitlement to pension benefits from an insurance carrier acceptable to Player at least equal to the following:

(a) The sum of Six Hundred Dollars ($600.00) per month for each year of services as a professional basketball player, which sum shall be paid at age fifty-five (55); and

(b) The right of early retirement at age forty-five (45) in which event the sum received shall be actuarially determined; and

(c) Life insurance in an amount equal to one hundred (100) times the cash value of the pension described above from the date that he ceases to play professional basketball and until the date that he commences drawing retirement.

Plaintiffs argue the contract is too ambiguous to be specifically performed, first contending that the contract does not establish a specific time by which funding is required. We disagree. Defendant was entitled to have his pension funded at least by the time it was clear he would never again play basketball for the Cougars.

It is clear from the actions of the parties to the contract and from the language of the instrument that the parties meant to provide an ascertainable monthly benefit to defendant upon retirement for the rest of his life. It is clear that at the time defendant rendered services to the Cougars, he was entitled to the pension benefits. It is clear that defendant would not have bargained so as to place himself in a situation where he might retire from basketball and have to wait two decades for his pension to be funded. After all, defendant had played basketball in the National Basketball Association (NBA) and was familiar with that league's established and protective pension plan. Finally, we cannot believe that businessmen as experienced as plaintiffs would plan to fund a pension with an insurance carrier when defendant reaches 55 years of age rather than when he was a younger man. The difference in the amount of the premiums is significant. We find that it is abundantly clear that the pension plan was required to be funded at least by the time defendant ceased playing for the Cougars.

Plaintiffs' second contention in their argument that the contract is too ambiguous to be specifically enforced is that the amount, frequency and duration of the retirement benefit are stated too ambiguously. We disagree.

"A court of equity is not authorized to order the specific performance of a contract which is not certain, definite and clear, and so precise in all of its material terms that neither party can reasonably misunderstand it." (Citations omitted.) Morris v. Yates, 226 Ga. 43, 45, 172 S.E.2d 428, 430 (1970). We agree with the statement of the Georgia Supreme Court cited above, and find that there is only one logical interpretation of Paragraph 5.

This issue has already been decided. A jury found in 1977 that both parties to this action agreed defendant should receive "[t]he sum of Six Hundred Dollars ($600.00) per month for each year of service as a professional basketball player, which sum shall be paid at age fifty-five (55)." This Court affirmed the trial court, and our Supreme Court denied certiorari. We find that the logical interpretation to be given to Paragraph 5(a) is that upon reaching age 55 defendant will be entitled to receive each month for the rest of his life the sum of $600 multiplied by the number of years he played professional basketball.

Plaintiffs' own actions indicate they would agree with our holding. During the reformation phase of this hearing, plaintiffs argued that the term in Paragraph 5(a) should be sixty dollars, not six hundred, and that the maximum they would ever be obligated to pay defendant under the contract would be $600 per month. The issue was decided against plaintiffs. Plaintiffs did not argue that the frequency and duration of the retirement benefit were ambiguous, only that there had been a mistake in the amount.

Furthermore, in 1973, plaintiffs purchased an annuity policy with the insured being defendant Caldwell. The policy provided for a pension of $696.75 per month, beginning at age 55, for the remainder of defendant's life. As of 1973, three years after the parties signed the contract in dispute, plaintiffs' actions indicate that they understood they owed some amount of money to defendant every month of his life after he reached age 55. The only term plaintiffs seemed to have any doubt about—the amount of the monthly payment —has been conclusively established by the courts of this state.

"`[I]f either party knows that the other understands him as speaking . . . with one meaning, he will not be allowed to say that he . . . intended a different meaning. . . .'" (Citation omitted.) Gaddy v. Bank, 25 N.C.App. 169, 174, 212 S.E.2d 561, 565 (1975). By their actions, plaintiffs have demonstrated that they understood the frequency and duration of the retirement benefit. The legitimate disagreement over the amount has been resolved by our courts. No ambiguity with respect to the amount, frequency, or duration exists.

Plaintiffs argue that the contract must be enforced according to its terms or not at all. They argue that the trial court cannot enforce paragraphs 5(a) and 5(b) while holding 5(c) to be impossible to perform. "Equity can only compel the performance of a contract in the precise terms agreed on. It cannot make a new or different contract for the parties simply because the one made by the parties proves ineffectual." (Citation omitted.) McLean v. Keith, 236 N.C. 59, 71, 72 S.E.2d 44, 53 (1952). In McLean, the plaintiffs wanted the Court to imply a contract term and specifically enforce that term. Such is not true in our case. In the case sub judice the trial judge simply struck a clause that was impossible to perform. A new contract was not made.

Plaintiffs also cite Lawing v. Jaynes and Lawing v. McLean, 20 N.C.App. 528, 202 S.E.2d 334 (1974), modified on other grounds, 285 N.C. 418, 206 S.E.2d 162 (1974), as authority for their position. In Lawing, plaintiffs sought specific performance by defendant Joyner of an option to purchase real estate. Joyner had already conveyed a portion of the property to defendant McLean. This Court stated that ". . . specific performance may be decreed for the portion retained." (Emphasis added.) Lawing at 537, 202 S.E.2d at 340. In a sense, this Court held in Lawing that specific performance of a contract may be granted even where certain parts are impossible to perform and cannot be enforced. We agree and find plaintiffs' argument to be without merit.

Plaintiffs argue next that defendant is not entitled to specific performance because he has made no showing that he does not have an adequate remedy at law. We disagree.

An adequate remedy is not a partial remedy. It is a full and complete remedy, and one that is accommodated to the wrong which is to be redressed by it. It is not enough that there is some remedy at law; it must be as practical and as efficient to the ends of justice in its prompt administration as the remedy in equity.

Sumner v. Staton, 151 N.C. 198, 201, 65 S.E. 902, 904 (1909).

Defendant's remedy at law is to wait until he is 45 years of age. At that point, if he wishes to exercise the early retirement provision set forth in clause 5(b), defendant must demand that plaintiffs fund his pension. If plaintiffs fail to comply, then defendant would have to ". . . file suit for the amount of accrued arrearage, reduce [his] claim to judgment, and, if the [plaintiffs] [fail] to satisfy it, secure satisfaction by execution." Moore v. Moore, 297 N.C. 14, 17, 252 S.E.2d 735, 738 (1979).

As Moore points out, parties often persist in their refusal to comply with judgments. Defendant would be put in the position of continually having to go to court as the pension payments became due and plaintiffs failed to comply. "The expense and delay involved in this remedy at law is evident," Moore at 17, 252 S.E.2d at 738; and we feel, inadequate.

Furthermore, there is no guarantee that plaintiffs will be financially solvent, in existence, or able to fund the pension when defendant reaches the age of 45. To force defendant to wait until the age of 45 before having any remedy would frustrate the intent of the parties in providing for pension benefits. After all, the whole purpose of a pension is to guarantee a known and steady source of income for the time when a person is no longer able to earn at his peak level, or earn a living at all.

"Adequacy is open ended; it does not exist as a matter of rule, but as a matter of fact. Whether a legal remedy is adequate or not, and how it compares with equity remedies, is a matter of analysis in each case." Dobbs, Law of Remedies 61 (1973). Defendant in the case sub judice is in a situation similar to that in which the plaintiff in Moore, supra, found herself. Our Supreme Court held plaintiff's remedy at law in that case to be inadequate, and citing from McClintock on Equity, § 46, p. 110 (2d ed. 1948), observed that even if the remedy at law which the plaintiff in that case might eventually receive was adequate, the intervention of equity was not prevented "`. . . if the procedures which must be followed at law would make the remedy less efficient and practical to meet the plaintiff's needs.'" Moore at p. 17, 252 S.E.2d at p. 738.

Defendant Caldwell showed that his remedy at law is inadequate. The plaintiffs' argument is without merit.

Plaintiffs further argue that specific performance of the parties' contract should not have been granted because it works an injustice in this case. We do not agree. It is true that,

The general rule may be laid down that a court of equity in the exercise of its discretion granting such relief will refuse to grant a decree of specific performance of a contract where the performance will produce hardship or injustice to the defendant [plaintiff here] not reasonably within the contemplation of the parties at the inception of the contract; . . .. 49 Am.Jur., Specific Performance § 59, p. 74.

Furthermore, if a person, from whom specific performance is sought, entered into the contract in question without understanding it, such performance will not be enforced. Pendleton v. Dalton, 62 N.C. 119 (1866).

Plaintiffs contend in their brief that defendant's actions were ". . . calculated to deceive and mislead plaintiffs' representatives and to take advantage of their misunderstanding of the contract." Plaintiffs further assert in their brief that evidence at trial tended to show that,

[W]hile there may have been no mutual mistake and while it may have intended to sign the contract it signed, including the terms of paragraph 5 as they appear, it is clear that [they] never understood. . . that the terms of paragraph 5 might mean what the Superior Court decreed they mean . . ..

This Court and probably no other court will ever know if plaintiffs meant to contract for a pension of only $60 per month times the number of years defendant played professional basketball, or whether defendant, a highly skilled basketball player, employed an equally skilled negotiator who was able to guarantee, with a large pension, the safety of his client's jump from the established NBA to the fledgling American Basketball Association.

Such knowledge is immaterial, however. All we need to know is that the subject contract was negotiated, prepared and examined by professionals who were businessmen experienced in the area of player contracts and professional basketball franchises. Furthermore, and more importantly, we know that the courts of this State have conclusively and finally decided that both parties executed paragraph 5(a) of the contract in accord with their intentions. Plaintiffs belittle their own intelligence when they argue that they never understood a court might interpret the language, ". . . sum of Six Hundred Dollars ($600.00) per month for each year of services as a professional basketball player. . ." to mean that defendant is entitled to the pension our courts have already decreed he is to receive.

Plaintiffs argue next that defendant's counterclaim for specific enforcement never should have been heard by the trial court. Plaintiffs contend the trial court erred by denying their motion to dismiss defendant's counterclaim for failure to state a claim. Plaintiffs' argument is without merit.

Defendant's counterclaim for specific performance states that:

The defendant avers that the contract of October 30, 1970, as written, was the agreement of the parties. The defendant asks the Court to enter judgment requiring the plaintiff to specifically perform all of the terms and provisions of the contract of October 30, 1970, and in particular the provisions of Article 5 of the contract as written.

Since the passage of the North Carolina Rules of Civil Procedure, in particular G.S. 1A-1, Rule 8(a)(1), which took effect on 1 January 1970, the State has followed the concept of notice pleading. No longer must a pleading detail the facts which constitute the cause of action. See Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970).

In explaining its interpretation of Rule 8(a)(1), Justice Sharp (later Chief Justice), speaking for our Court in Sutton, stated that, "The North Carolina Rules of Civil Procedure are modeled after the federal rules." Id. at 99, 176 S.E.2d at 164. Justice Sharp went on to state that the Court would examine federal case law for guidance in developing the philosophy of the State's Rules of Civil Procedure. The Sutton court then cited Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957), for the proposition that ". . . all the [Federal] Rules require is `a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Sutton, 277 N.C. at p. 102, 176 S.E.2d at p. 165. The Sutton court went on, at p. 102, 176 S.E.2d at pp. 165-166, citing Conley, stating that "`. . . a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'"

It is clear that defendant's counterclaim meets the requirements of G.S. 1A-1, Rule 8(a)(1). The trial court did not err by dismissing plaintiffs' motion.

Plaintiffs further assign as error the trial judge's order on 6 April 1979 that documents from the file of Mr. Kenneth Goldman, one of defendant's former lawyers, remain under seal. Superior Court Judge William Z. Wood had examined the documents in 1973, before this action was severed from the reformation action, and had ruled that the documents were protected from disclosure by the attorney-client privilege. Plaintiffs did not appeal Judge Wood's order, only the trial judge's recognition of it. Plaintiffs' exception is ineffectual. One superior court judge cannot modify, reverse or set aside a judgment of another superior court judge. In Re Burton, 257 N.C. 534, 541, 126 S.E.2d 581 (1962). Judge Mills was bound by Judge Wood's action. Plaintiffs excepted to the wrong order.

Defendant cross-appeals in this case, arguing that the trial court erred by refusing to specifically enforce paragraph 5(c) of the contract. Paragraph 5(c) states that:

At the time of the rendering of services to Club by Player, Player shall be eligible for and shall receive entitlement to pension benefits from an insurance carrier acceptable to Player at least equal to the following:

(c) Life insurance in an amount equal to one hundred (100) times the cash value of the pension described above from the date that he ceases to play professional basketball and until the date that he commences drawing retirement. (Emphasis added.)

The trial court was correct in its holding that this section is impossible to perform and cannot be specifically enforced.

It is important to note that "cash value" has a distinct meaning in the insurance industry. The cash value of a pension plan would be an amount quite different from the monthly benefits. If paragraph 5(c) had stated that plaintiffs were obligated to purchase life insurance in an amount equal to one hundred times the monthly benefits ($6,600), paragraph 5(c) could be specifically enforced. Plaintiffs would be obligated to purchase $660,000 worth of life insurance. As the paragraph reads, however, plaintiffs would be tied to a cash value that would range from approximately $360,000 when defendant ceased playing basketball to approximately $910,000 at the time defendant was eligible to draw retirement.

Uncontradicted testimony at trial makes it clear that it is commercially impossible to insure an individual for an amount ranging from $36 million to $91 million. "[A] court of equity will not do a useless thing . . ., specific performance will not, as a rule, be decreed against a defendant who is unable to comply with his contract." Lawing, supra, 20 N.C.App. at 537, 202 S.E.2d at 340. Furthermore, a court of equity will not often grant specific performance where by doing so it is placed in the position of constantly supervising performance. Such would be the case here because each year between the time defendant ceased to play basketball and the time he became eligible for his pension, the cash value would rise, thus requiring plaintiffs to purchase additional life insurance.

Defendant would have us modify paragraph 5(c) so that plaintiffs would be bound to provide life insurance at 100 times the amount of the monthly benefit. This we cannot do. "Equity can only compel the performance of a contract in the precise terms agreed on. It cannot make a new or different contract for the parties simply because the one made by the parties proves ineffectual." (Citation omitted.) McLean, supra, 236 N.C. at 71, 72 S.E.2d at 53.

Defendant's second argument on its cross-appeal is that the trial court erred when it refused to grant defendant's request for attorney's fees. The trial court did not err.

Defendant bases his claim upon paragraph 8 of the contract which essentially states that:

The Club agrees to indemnify Player,. . . and hold [him] harmless from all liabilities and claims of whatever nature resulting from Player's entering into this Agreement. . . . In addition, the Club will pay all legal expenses in connection with any and all such claims,. . .. Player shall have the right to select his own attorney, . . . which attorney shall be reasonably approved by the Club. (Emphasis added.)

Testimony at trial indicates that paragraph 8 applied to expenses defendant might incur in actions involving third parties —not with a party to the contract. Furthermore, the language of paragraph 8 clearly indicates that it only applied to actions involving third parties. Surely plaintiffs would not presume to have the right to approve defendant's lawyers in an adverse action between the two parties. Defendant's assignment of error is without merit.

For the reasons stated above, the decision of the trial court is

Affirmed.

PARKER and HARRY C. MARTIN, JJ., concur.