Renner Plumbing, Heating & Air Conditioning, Inc. v. Renner

Citations: 303 S.E.2d 894; 225 Va. 508; 1983 Va. LEXIS 249Docket: Record 801592

Court: Supreme Court of Virginia; June 17, 1983; Virginia; State Supreme Court

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The Supreme Court of Virginia addressed the case Renner Plumbing, Heating and Air Conditioning, Inc. v. Connie I. Renner, focusing on the admissibility of parol evidence in a breach of contract dispute. Connie I. Renner, the plaintiff, sought approximately $57,000 in damages for breach of a contract dated June 28, 1968, against the defendants Renner Plumbing, Heating and Air Conditioning, Inc., Hugh T. Campbell, and Lloyd R. Renner. After a lengthy pre-trial process involving a counterclaim and extensive discovery, the jury trial occurred in June 1980, resulting in a verdict favoring the plaintiff for $25,351.90 plus interest. The case arose from Connie Renner's sale of his plumbing business to Campbell and Lloyd, who lacked the funds for the purchase. A corporate attorney drafted two contracts: one for the sale of stock, which was fully performed, and another focused on Connie's employment as an advisor to the corporation. This employment contract stipulated a weekly salary until Connie's 65th birthday and a percentage of the corporation's annual net profit, defined with specific accounting exclusions. The court's decision hinged on whether the trial properly admitted parol evidence related to the employment contract's terms.

Renner's salary will be adjusted for inflation or recession after the first year based on the Consumer Price Index from the U.S. Department of Labor. Starting May 29, 1975, the Corporation is obligated to pay Renner a lifetime sum not exceeding $2,000 annually, ensuring it does not impact his Social Security benefits. The Corporation will not pay bonuses, commissions, retirement contributions, or dividends on common stock if annual net profits are below $5,000, although dividends on preferred stock remain unaffected. The Corporation must provide Renner with a vehicle until May 29, 1975. 

Connie, who initially served as President and later as Treasurer, experienced a decline in his role and respect among employees. After suffering a stroke on October 27, 1971, he ceased business participation. From the agreement's execution until August 5, 1974, he received his weekly salary but payments were terminated due to ongoing litigation. Connie filed a lawsuit on July 19, 1974, claiming that the computation of his ten percent share of annual net profits should exclude any salary or bonuses exceeding $139 per week paid to Campbell and Lloyd, asserting that they received higher salaries from 1969 to 1975. He alleged that excessive salary deductions led to underpayment of his share and sought recovery for unpaid salary from August 5, 1974, to May 29, 1975, as well as the $2,000 annual payments specified in the contract, claiming anticipatory breach of the agreement by the defendants.

Connie's de bene esse deposition was presented in full at trial, as he did not testify in person. He stated that the business's total purchase price was $80,000—not $50,000—comprising $50,000 for merchandise, equipment, and accounts receivable, and $30,000 for goodwill. The employment agreement was structured to facilitate this $30,000 payment without requiring Connie to perform specific duties. Testimony revealed that Campbell and Lloyd were restricted from raising their own salaries without plaintiff's approval. The defendants argued that Connie's testimony contradicted a clear written agreement regarding the transaction's subject matter, which they claimed was the stock sale, not asset sales, and that goodwill was not mentioned in the agreement. They contended that Connie's statements about his duties and salary approval processes altered the contract's terms. Connie countered that the absence of detailed duties in the contract was intentional, as the payments were part of the total purchase price, relieving him of specific obligations. He asserted that his role was minimal and primarily advisory, with no objection from the defendants to his claim of having only one duty: to assist when needed. Defendants, while acknowledging the admissibility of parol evidence on the term 'advisor,' argued that it should not allow extensive extrinsic evidence on how net profits were computed, which they claimed was done according to the contract's specifications by their accountants, following attorney White's instructions from a November 1968 letter.

Defendants assert that the plaintiff's testimony regarding the calculation of net profit contradicts the company accountant's assertion that the amount was correctly determined, thereby altering the contract's meaning. The dispute involves the payment method for stock under a separate agreement. Initially, the accountant believed the stock purchase would be fully funded by the corporation. However, a subsequent letter from White proposed using a different payment method to reduce corporate taxes, wherein the company would make monthly payments to Connie, later reported as income to Campbell and Lloyd for tax purposes. The contention lies in whether these year-end payments should be classified as 'salaries' or 'bonuses,' impacting the plaintiff's ten-percent payment under the contract. The jury's verdict of $25,351.90 indicates they classified the payments as 'bonuses.' The undisputed amounts included $10,000 for annual payments over five years and $7,746.46 for Connie's weekly salary, leaving a balance of $7,605.44 representing the underpayment calculated as bonuses. The court upheld the admissibility of extrinsic evidence, emphasizing that parol evidence is generally inadmissible to alter a complete and unambiguous written contract, unless ambiguities exist. The contract in question is deemed ambiguous, particularly regarding terms like 'advisor' and 'bonuses.' Defendants conceded that extrinsic evidence was appropriate to clarify the term 'advisor,' but without a defined meaning, assessing the plaintiff's contractual performance remains subjective.

In a plumbing business context, the term 'advisor' within the contract is deemed critical yet inadequately defined, necessitating clarification for completeness. The ambiguity surrounding the term 'bonuses' complicates the understanding of the payment structure in the transaction, indicating a need for extrinsic evidence to clarify the deal's framework. The resolution of how goodwill and salary raises factor into net-profit calculations requires independent factual understanding. The court allowed extrinsic evidence and dismissed the defendants' challenge regarding jury instruction, finding no reversible error in the trial court's decisions. Defendants' claims about the trial court's admission of evidence differing from the plaintiff's pleadings and the striking of the counterclaim were not sufficiently specified in their assignments of error, leading the court to disregard these issues. The judgment is affirmed.