Frank Shipp, an outside salesman for Ditch Witch Equipment of Tennessee, Inc., entered a breach of contract case after the company refused to pay him commissions on a lease he facilitated before resigning. Shipp operated under a verbal agreement, receiving a base salary and commissions. He actively marketed equipment to Greater Dickson Gas Authority, which led to a lease agreement for multiple pieces of equipment. After his resignation, Ditch Witch claimed Shipp was not entitled to commissions because he left before any payments were made on the lease.
The trial court initially ruled in Shipp's favor for commissions on one piece of equipment, but Shipp appealed, seeking commissions on all three pieces. The Court of Appeals reversed the lower court's decision, concluding that Shipp was entitled to commissions for all three leased items. The ruling highlighted the importance of Shipp’s contributions in securing the lease and emphasized that the evidence supported his claim for commissions. The judgment was affirmed in part and reversed and modified in part.
On August 1, 2002, Greater Dickson and Ditch Witch entered into a thirty-six-month Equipment Lease Agreement for six items, totaling $7,245 per month, amounting to $260,820 in total lease payments. Shortly thereafter, on August 12, 2002, Shipp resigned from Ditch Witch without notice and had not received any commissions related to the lease at that time. Ditch Witch received the first lease payment from Greater Dickson between August 8 and August 13, 2002. Following his resignation, Shipp requested a 5% commission on the lease, but Ditch Witch's president, Aubrey Needham, Jr., informed him in a March 20, 2003 letter that he was not entitled to commissions since he was not the "salesman of record" when the first payment was made. Needham outlined the commission structure, stating that while equipment sales above the manufacturer's suggested list price earned 5%, rentals and monthly leases also earned 5% of rental payments, but only if the salesman was employed at the time of payment. Needham also demanded repayment of $758.95 in advances made to Shipp that were not covered by commissions. On August 12, 2003, Shipp filed a lawsuit against Ditch Witch for unpaid commissions, alleging breach of contract, unjust enrichment, fraud, and violation of Tennessee Code Annotated 50-1-102. Ditch Witch denied the allegations and counterclaimed for the repayment of the advances. A bench trial occurred on August 22, 2005, where Shipp testified about his employment and commission structure, stating he had a verbal agreement for a $150 weekly salary plus commissions. He described his efforts to maintain Greater Dickson's business, including addressing their dissatisfaction with Ditch Witch products, which ultimately led to the lease agreement.
Shipp acted as a liaison between Greater Dickson and Ditch Witch, claiming a direct role in facilitating the lease, though he did not draft the paperwork. He was present during the negotiation and signing of the lease but acknowledged that others determined the pricing and terms. Shipp believed he would earn commissions for leases in his territory, except for specific house accounts like BellSouth. He was assured by Northcutt that he would receive some commission for the Greater Dickson lease, but later received a letter from Needham denying his entitlement due to his employment status at the time of the first lease payment. Shipp contested this denial, citing a precedent where a former employee received commissions post-employment. He argued he deserved a 5% commission on the lease's total price. While he did not dispute Ditch Witch's counterclaim regarding advances against his commissions, he sought to offset any owed amounts.
Jesse Davis, director of operations at Greater Dickson, corroborated Shipp's involvement, stating Shipp initiated discussions about the lease program. Davis characterized Shipp as the primary contact, although he noted that the specifics were handled by others at Ditch Witch. Former Ditch Witch sales representative Mike Koby testified that he received an 8% commission for equipment leased to Greater Dickson after Shipp's departure, confirming that Koby's commission was documented and paid.
Leroy Hylton, general manager of Ditch Witch, provided testimony regarding the employment and compensation structure surrounding the Greater Dickson account. Hylton, who has been with Ditch Witch for over twenty-nine years, stated he was not privy to Shipp's hiring details and confirmed that Shipp was not compensated for servicing Greater Dickson during his employment until August 2002. Hylton characterized the Greater Dickson account as "uniquely structured" and a "house account," meaning it was managed directly by the company rather than by sales personnel, who typically do not receive commissions on such accounts. He noted that no salesperson had ever been paid for servicing the Greater Dickson account, although commissions were earned on equipment sales.
Hylton acknowledged that a former employee, Koby, received commissions related to the lease of locators and transmitters under a separate agreement through the electronics division. He clarified that Shipp was not paid commissions on three primary pieces of equipment because he was no longer employed by Ditch Witch when the lease payments began. Hylton indicated that had Shipp remained employed and continued servicing the account, he would have received a 2 percent commission on the equipment rental payments.
Hylton admitted that Shipp had worked on the Greater Dickson lease, stating he was present during final negotiations. If Shipp had received a lump-sum commission at the end of the lease, it would have totaled approximately $2,885 based on a calculated profit of $57,770 over the thirty-six-month lease.
Kent Northcutt, who had been with Ditch Witch for about twenty-two years and was the branch manager when Shipp was hired, testified that Shipp's employment agreement was verbal and did not cover compensation for existing accounts like Greater Dickson. Northcutt could not recall whether he informed Shipp that the Greater Dickson account was a house account, and he confirmed that Shipp only received a $150 weekly base salary without additional compensation for servicing existing accounts.
Northcutt testified about Ditch Witch's lease agreements, noting that only one other company, United Cities Gas/Atmos Energy, had a similar lease with them. He was the sales representative for the Atmos Energy account, receiving a one-time commission but no monthly commissions for lease contracts during his time at Ditch Witch. Northcutt was involved in the negotiations for the Greater Dickson lease and serviced this account after Shipp's departure, yet he did not receive commissions on it.
The trial court, after reviewing the evidence, found that Shipp’s efforts contributed to securing the Greater Dickson lease, determining that he was the salesman of record for Unit D23. The court ruled that Shipp's commissions vested upon his termination and were due monthly, resulting in an award of $3,221.30 after deducting advances owed to Ditch Witch. It also concluded that there was no fraud in Shipp's hiring process, categorizing the matter as a commission dispute. Shipp was awarded $500 in attorneys' fees for a discovery motion.
On appeal, Shipp contends that he should have received commissions for Units D21 and D22 as well, asserting he was the salesman of record for the entire lease. Ditch Witch does not contest Shipp's designation as the salesman for Unit D23 or the awarded commission. The appellate review will consider the trial court's factual findings as correct unless contradicted by overwhelming evidence, while conclusions of law will be reviewed without such presumption.
Shipp argues that the quotes for Units D21 and D22 incorrectly identify Northcutt as the 'salesman' solely because they were generated from his computer, and claims there was no trial evidence to support Northcutt's role as the salesman for those units. He asserts that the trial court mistakenly relied on these quotes to limit his commission to Unit D23. In contrast, Ditch Witch maintains that the trial court rightly determined Northcutt was the salesman of record for Units D21 and D22, citing the quotes as evidence that Shipp was not the only salesman involved in the lease. The parties agree on the verbal terms of Shipp's employment, as outlined in a letter from Needham, which stated that Shipp would earn a 5% commission on monthly lease payments for the 'salesman of record' at the time of payment. The crucial issue is whether Shipp was the 'salesman of record' for Units D21 and D22.
The trial court acknowledged Shipp's contributions to the lease agreement and noted that his commission interest vested upon quitting Ditch Witch. However, it differentiated Units D21 and D22 from Unit D23 based solely on the quotes attributing sales responsibility to Northcutt. The appellate review finds insufficient evidence to support this conclusion. Ditch Witch did not argue during the trial that the units should be treated differently, consistently claiming Shipp was not entitled to any commission for various reasons, none of which were supported by testimony asserting that Shipp was ineligible for commissions on Units D21 and D22 based on those quotes.
The trial court implicitly rejected Ditch Witch's reasons for denying Shipp's commissions, which included claims about the timing of lease payments, the status of Greater Dickson as a house account, the nature of the lease, and Shipp's compensation discussions with Northcutt. Ditch Witch did not challenge the trial court's credibility determinations, and the record supports the finding that its reasons were not credible. Additionally, witnesses, including those from Ditch Witch, corroborated Shipp’s assertion that he was the primary sales representative for the Greater Dickson lease.
Shipp successfully demonstrated that he was the primary salesperson responsible for securing the lease with Greater Dickson for Units D21, D22, and D23, countering claims that Northcutt held that role. Testimonies from Shipp, Jesse Davis from Greater Dickson, and Hylton confirmed Shipp's pivotal involvement, while no evidence supported Northcutt's status as the 'salesman of record.' The trial court's conclusion that Shipp was the salesperson for Unit D23 but not for the other two units was inconsistent with the evidence, which indicated all three units were leased simultaneously under similar conditions. Consequently, the court found in favor of Shipp, affirming his entitlement to a 5% commission on the total lease value, resulting in a total commission of $12,282.05 after deductions, plus an awarded attorney’s fee of $500. The court denied Shipp’s request for additional attorney’s fees and found no evidence of fraud in the inducement regarding his employment with Ditch Witch. The trial court's findings were partially reversed, affirming parts of the decision, and the case was remanded for further proceedings related to post-judgment interest. Costs of the appeal were assigned to Ditch Witch Equipment of Tennessee, Inc.
