Contract – Inter-Corporate Liability Doctrine – Car Dealership & Finance Company – Damages – Unfair Trade Practices – Treble Damages – Prejudgment Interest – Attorney’s Fees

Hanes v. Darar (Lawyers Weekly No. 12-16-0282, 17 pp.) (Wanda G. Bryant, J.) Appealed from Durham County District Court. (James T. Hill, J.) N.C. App. Unpub. Full-text opinion.

Holding: Where (1) defendant Darar was the owner and president of both corporate defendants; (2) both businesses shared officers, agents, business locations and phone numbers; and (3) the two corporations had a “complimentary” nature (a used car dealership and the company that financed customers’ purchases of the dealership’s cars), the trial court could apply the inter-corporate liability doctrine from W.G. Fountain v. West Lumber Company, 161 NC 35, 76 S.E.2d 533 (1912).

We affirm the trial court’s finding of liability against all defendants. However, we reverse and remand the trial court’s order awarding plaintiff damages on her breach of contract claim, prejudgment interest on trebled damages, and attorney’s fees.

The trial court found that Darar refused payments from plaintiff on numerous occasions, that Darar maliciously perpetrated the breach of contract out of retaliation for plaintiff’s alleged wrongdoing against Darar’s wife, and that

Darar disabled plaintiff’s vehicle. These findings support the trial court’s conclusions of law regarding Darar’s liability in his official capacity as president of the corporate defendants.

Even though plaintiff bought new tires and installed them on the vehicle, and even though the new tires were never returned to plaintiff, the trial court erred when it included half the cost of the new tires in its award of damages for breach of contract. The trial court also included in plaintiff’s damages award transportation costs the plaintiff incurred from the time her car was disabled until she was able to afford a replacement vehicle and a return of plaintiff’s down payment on the vehicle.

As required by G.S. § 25A-25, the parties’ consumer credit sale contract provided, “Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.” Because § 25A-25 limits the debtor’s recovery in a consumer credit contract to the amount paid by the debtor, plaintiff’s breach of contract damages should have been limited to $1,905 ($1,500 as down payment and $405 for the tags and taxes on the vehicle.). We reverse a portion of the trial court’s breach of contract damages award and remand for entry of a damages award in accordance with this opinion.

The trial court’s findings — that defendants repeatedly refused to accept plaintiff’s contract payments based on alleged wrongdoing by plaintiff against Darar’s wife — demonstrate defendants’ conduct to be immoral, unethical, oppressive, unscrupulous, and arising out of a position of power the defendants had over plaintiff.  Defendants’ retaliation against plaintiff by disabling her vehicle using a “past time payment assurance device,” allowing the vehicle to sit in plaintiff’s driveway for two months before repossessing it, and accelerating the debt due under the promissory note after plaintiff filed suit constitutes substantial aggravating circumstances attending the breach of contract. These findings support the trial court’s conclusion that defendant Faithful Auto Finance Inc.’s breach of contract violated the Unfair and Deceptive Trade Practices Act.

Our court has previously held that a pre-judgment interest award should not attach to trebled damages, but only to the actual damages awarded for the breach of contract that was found to be an unfair trade practice. Therefore, the trial court erred by awarding plaintiff pre-judgment interest on the trebled damages arising out of the unfair and deceptive practices claim, instead of the actual damages awarded for breach of contract. Accordingly, the award of damages should be reduced to reflect that no pre-judgment interest is awarded on the trebled damages.

Finally, the trial court erred when it awarded plaintiff attorney’s fees without finding that defendants unwarrantedly refused to fully resolve the dispute with plaintiff. We reverse the trial court’s judgment awarding attorney’s fees and remand for further findings.

Affirmed in part, reversed and remanded in part.