2011-613, David Ellis v. Candia Trailers and Snow Equipment, Inc. & a.

No. 2011-613 Merrimack

, of Concord (James F. Laboe, of Manchester, by brief and orally, for the

benefit of David Ellis and, therefore, David Ellis is the only party to this appeal.” petitioner in the underlying action, Ellis admits that all claims in this appeal “accrue solely to the 1 Although Precision Truck and Body Equipment, Inc. (Precision Truck) is also named as a

reporter@courts.state.nh.us partial restitution as a remedy, and finding the New Hampshire Consumer Court (McNamara, J.) rescinding a non-compete agreement and ordering LYNN, J. The petitioner, David Ellis, 1 appeals an order of the Superior

brief, and Mr. Laboe orally), for the petitioner. Orr & Reno, P.A. and Robert S. Carey on the to press. Errors may be reported by E-mail at the following address:

editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as p. 2 Goff shall be relieved of [his] obligations under the Non-Compete Agreement.” covenant not to compete.” good will, and that Ellis “would not acquire the business without Goffs’

cost by June 1, 2007, and “[i]f [Ellis] fails to fulfill this covenant, . . . Jeffrey IPA. The IPA obligated Ellis to buy Precision Truck’s remaining inventory at to purchase the business assets of Precision Truck, including the company’s much sooner – on June 1, 2007 – if Ellis breached the third agreement, the

of the [APA].” The NCA provided that, under the terms of the APA, Ellis agreed Although the NCA was to remain in effect for seven years, it would expire of [Precision Truck] with whom [it] has had a relationship prior to the execution solicit, divert or take away, the business or patronage of any of the customers

NCA. with Ellis in his operation of Precision Truck and, among other things, “not [to] available in case of breach. Ellis paid $340,000 to the Goffs for executing the

On March 23, 2006, the Goffs executed the NCA, agreeing not to compete The parties agreed that equitable remedies, including injunctive relief, would be conditioned on the Goffs executing the NCA and IPA.

Ellis signed the APA on February 22, 2006, agreeing to pay $20,000 for the facts or analysis relevant to this appeal. retained after selling Precision Truck to Ellis. Although named as a respondent, it plays no role in Inventory Purchase Agreement (IPA). 2 Candia Trailers and Snow Equipment, Inc. is the name given to the business which Jeffrey Goff Asset Purchase Agreement (APA), a Non-Compete Agreement (NCA), and an material breach of [the NCA], even though some damages may be provable.” full-time consultant. The APA specified that Ellis’s obligations were

Precision Truck to Ellis, memorializing the agreement in three documents: an truck bed parts, bed linings, and various accessories. In 2006, the Goffs sold suffer irreparable harm and would not have adequate remedy at law for the owned and Goff operated Precision Truck, a business which sold and installed for ninety days after the closing, during which time Goff would work there as a Each party acknowledged that the other “would

The trial court found the following facts. Since the 1980s, the Goffs which provided that Ellis would operate Precision Truck at its existing premises etc. The APA also contained a consulting agreement and tenancy agreement, telephone numbers, customer lists, working agreements, advertising materials,

the non-compete agreement. We affirm in part, reverse in part, and remand. principals, Jeffrey Goff (Goff) and Suzanne Goff, cross-appeal the rescission of conduct. The respondents, Candia Trailers and Snow Equipment, Inc.2 and its Protection Act (CPA), RSA ch. 358-A (2009), inapplicable to the respondents’ p. 3 Goff owed Ellis an obligation not to compete, i.e.

months. Multiplying the monthly value by the number of months during which

value, $340,000, by its intended duration of seven years, or eighty-four court calculated a restitution award for breach of the NCA by dividing its total Having found that the NCA was severable from the IPA and APA, the

not exist, it rescinded the NCA and awarded Ellis partial restitution.

the NCA almost immediately after signing it and acted as though the NCA did that date. Nevertheless, because the court found that Goff materially breached June 1, 2007, the trial court ruled that the NCA remained in effect only until

did not go far enough to return him to the status from the IPA and APA. Ellis, on the other hand, argues that partial restitution rescinding the NCA alone was improper because the NCA was not severable circumstances of each particular case.” Mooney v. Nationwide Mut. Ins. Co.

IPA. Because Ellis failed to purchase Precision Truck’s remaining inventory by

insufficient to support a finding of material breach justifying rescission; and (2) matter within the sound discretion of the trial court, depending upon the “Rescission is an equitable remedy the granting of which is always a

The court also found that Goff breached the NCA and that Ellis breached the agreements, each with its own terms, obligations, and remedies for breach. The trial court found that the NCA, IPA, and APA were three separate

The respondents argue that: (1) the evidence presented to the court was

alone and ordering partial restitution.

discretion when it rescinded the NCA and awarded partial restitution to Ellis. Both parties argue that the trial court unsustainably exercised its NCA, APA, and IPA to be severable, we reverse its order rescinding the NCA inapplicable. Because we conclude that the trial court erred when it found the he breached. Ellis also argues that the trial court erred when it found the CPA

and violation of the CPA. trial only on his claims seeking rescission and restitution for breach of the NCA had initially included a claim for damages, Ellis ultimately opted to proceed to

Ellis was an isolated sale. This appeal and cross-appeal followed.

to retain the bulk of the consideration he received for the agreement (the NCA)

CPA, asking the court, among other things, to rescind the NCA. Although he

claim, finding the statute inapplicable because the sale of Precision Truck to awarded Ellis the resulting amount, $60,714.28. The court rejected Ellis’s CPA

Ellis sued the respondents for breach of contract and violation of the

Precision Truck’s inventory by June 1, 2007.

began competing with Precision Truck. Ellis thereafter failed to purchase all of Within a few weeks of signing the NCA, and in violation of its terms, Goff p. 4 Annotation, Partial Rescission of Contract

purposes is to be regarded as embracing two or more contracts.

proposition that the contract is severable and for rescission

Usually where partial rescission is allowed it is founded on the Kidd v. Traction Co.

. . . . decision of which is reviewable in this court. upon to interpret the documents. This is a question of law, the 4 the documents were made. In other words, the court is called

the whole of the contract and cannot be exercised as to a part only. intention, when read in the light of the circumstances under which

N.H. 112, 115 (2010). questions of law de novo. In the Matter of Taber-McCarthy & McCarthy, 160 corresponding consideration is analogous to a separate contract.” Technical, 74 N.H. 160, 170 (1907) (citation omitted). We review considerations be capable of apportionment, so that each promise and its

The general rule undoubtedly is that a right to rescind applies to character of the documents which they used to express their rescinded. intention of the parties as shown by the terms and formal [Whether a contract is severable or indivisible] depends upon the

Aid Corp. v. Allen, 134 N.H. 1, 18 (1991).

rescinded the NCA alone. “[Severability] requires that the parties’ promises and The trial court found the APA, IPA, and NCA to be severable and

. . . must . . . stand or fall in its entirety.”). Pearson v. Baldwin, 81 N.H. 247, 249 (1924) (“[A]n entire, indivisible contract

before the transaction, id

If a contract is part of a larger agreement, it may be rescinded only if it is

Instruments; Rescission § 80, at 558 (2004). obtain rescission and must seek damages instead. 12A C.J.S. Cancellation of N.H. 145, 147-48 (1983). If the status quo cannot be restored, a party cannot as determined by the trial court.” Derouin v. Granite State Realty, Inc., 123

restitution, is a remedy that restores the injured party to the position occupied 149 N.H. 355, 357 (2003) (quotation omitted). Equitable rescission, with p. 5 Gilman v. Berry

as independent.

Maloney v. Company a single assent to the whole matter” and “were part of one single undertaking.” breach may be paid for in damages, the promises may be regarded another, each agreement was contingent on the other two, they “resulted from Truck’s good will, in exchange for $20,000. To protect that good will, Ellis The primary asset transferred to Ellis under the APA was Precision

refer to a part only of the consideration on both sides, and a earlier than if Ellis completed the inventory purchase. Because, in one way or

77A C.J.S. Sales

of them is a condition precedent to the other; but if the agreements by a fixed date, Goff’s obligations under the NCA would terminate seven years consideration on both sides, the promises are dependent, and one such case are . . . independent.” (citation omitted)). Where the agreements of parties relate to the whole of the defendant shall not set it up as a condition precedent, and the covenants in consideration, and a breach of that part may be paid for in damages, the

apportionment. consideration, or whether it is susceptible of division and parts are interdependent and common to one another and to the performance under the IPA: if he failed to purchase Precision Truck’s inventory NCA. In addition, the duration of the NCA was contingent upon Ellis’s that Ellis would not buy Precision Truck’s assets unless the Goffs signed the whether the agreements are severable. supported by separate consideration. This, however, is not dispositive of 76, 79-80 (1817) (“[W]here mutual contracts go only to a part of the The trial court correctly noted that each agreement is, on its face,, 59 N.H. 62, 64 (1879); see Robinson v. Crowninshield, 1 N.H.

is to be performed only as a whole and whether each and all of its

the NCA and Ellis executing the IPA. The NCA referenced the APA and stated

contract as severable], it is proper to consider whether the contract As an aid to ascertaining the intention of the parties [to treat the

the APA made Ellis’s obligations under it contingent upon the Goffs executing parties structured the sale of Precision Truck as three separate agreements,

§ 157, at 224 (2008); cf. Allen, 134 N.H. at 18. Although the

because, by their terms, the agreements are interdependent. We conclude that the NCA is not severable from the IPA and APA indivisible agreement. Kidd

p. 6 the documents were made,” the APA, IPA, and NCA were intended as an entire,

Hale v. Brown ruled that the IPA, APA, and NCA were severable. Kidd and independent items. complete agreement.” “[R]ead in the light of the circumstances under which Accordingly, we hold that the trial court erred as a matter of law when it be entire, although the subject of the contract may consist of several distinct

items, and the price to be paid by the other is proportional to each item to be therefore was improper to grant rescission of the NCA alone, we reverse the

, 59 N.H. 551, 557 (1880) (quotations omitted; emphasis added).

rescinded without rescinding the IPA and APA as well. Annotation, supra if the consideration to be paid is single and entire, the contract must be held to performed, . . .such a contract will generally be held to be severable. But If the part to be performed by one party consists of several distinct and separate agreements as indivisible. without the others.” Goff testified that he too “always looked at it as one bundle” and that “[n]ot one of these agreements meant much of anything (quotation omitted)). 3 The disproportional allocation of consideration may also reflect the parties’ intent to treat the IPA, and NCA as one agreement. Ellis agreed that the APA “was all part of one

Given that the three agreements were interdependent and that it of the whole contract.” (citation omitted)); Piper v. Boston & Railroad A.L.R. at 418, 423.

Because the NCA was not severable from the IPA and APA, it could not be both sides,” i.e., 74 N.H. at 170. agreements, in one way or another, “relate to the whole of the consideration on

instrument itself, but also in view of all the surrounding circumstances.” Furthermore, both Goff and Ellis testified that they perceived the APA, 243 (1979) (“Intent . . . should be determined not only in light of the 435, 439 (1910); see also MacLeod v. Chalet Susse Int’l. Inc., 119 N.H. 238,

determined by the intent of the parties, as evinced by the language and nature (“[Whether all parts of an agreement are dependent and inseparable] is to be

year instead of seven in case of Ellis’s breach. As a result, all three

it. The contract was divisible.”). article formed the consideration, in this case, for the promise to pay the price of Carleton v. Woods, 28 N.H. 290, 294-95 (1854) (“The sale and delivery of each Goffs not to compete and incentivizing Ellis to keep the NCA intact. Cf.

, the protection of Precision Truck’s good will by obligating the

Precision Truck’s good will of the protections stemming from the NCA in one Ellis to purchase inventory at cost. However, the effect of the IPA stripped the least amount of consideration in support of it, given that it merely required consideration paid for the sale of the business.3 On the surface, the IPA had required the Goffs to sign the NCA and paid them $340,000, the bulk of the p. 7 Id

in business.

course of a trade or business. See

an equitable relationship between consumers and persons engaged

encompass isolated sales or contracts that are not undertaken in the ordinary

transaction for both parties.” Ellis concedes that the sale of Precision Truck “was an isolated, one time the Consumer Protection Act. The purpose of the Act is to ensure Similarly, isolated sales of property by an owner are not subject to is narrower than its broad language may suggest, and that it does not undertaken in the ordinary course of a trade or business. . . . people of this state.” RSA 358-A:1, II. We have held that the scope of the CPA and shall include any trade or commerce directly or indirectly affecting the

transaction is strictly private in nature, and is in no way constituted an “isolated sale[] of property by an owner” and was “in no way mixed, and any other article, commodity, or thing of value wherever situate,

trade or commerce. Chase v. Dorais

‘business context.’”). person engaged in trade or commerce, such that they were acting in a transaction between a person engaged in trade or commerce and another under the Consumer Protection Act are not available where the parties were on equal footing at the sale.” The sale of Precision Truck transaction is a personal or business transaction. . . . Remedies of any services and any property, tangible or intangible, real, personal or trial court that “Goff was not in the business of selling his business and the of the transaction, and the parties to determine whether a trade and commerce as “the advertising, offering for sale, sale, or distribution Comm’r, N.H. Banking Dep’t, 163 N.H. 365, 376 (2012). We agree with the conduct of any trade or commerce within this state.” The CPA broadly defines, 122 N.H. 600, 601-02 (1982); cf. Frost v. involvement in a single transaction is insufficient to constitute engagement in

Massachusetts CPA] requires a dual inquiry whether there was a commercial LLC, 887 N.E.2d 244, 259 (Mass. 2008) (“[A]nalysis of the applicability of [the . (quotations and citations omitted); accord particular transaction, we analyze the activity involved, the nature Milliken & Co. v. Duro Textiles,

unfair method of competition or any unfair or deceptive act or practice in the

To determine whether the Consumer Protection Act applies to a

claim. RSA 358-A:2 (2009) declares it “unlawful for any person to use any (1999). Turning to Ellis’s CPA claim, we affirm the trial court’s dismissal of this Hughes v. DiSalvo, 143 N.H. 576, 578

what remedies, if any, are available. award of $60,714.28 in restitution and remand to the trial court to determine p. 8 “essence” of the agreement between the parties, or be “one which

[F]or a breach of contract to be material, it must “go to the root” or

disagree. materiality of a breach cannot be proved without evidence of damages. We

subject of the CPA claim in Hughes See the evidence. Cook v. Sullivan breach of the NCA was material and thus justified rescission and restitution. evidence presented to the court was insufficient to support a finding that Goff’s

evidence of damages at trial. In effect, the respondents argue that the

Whether a breach of contract is material is a question of fact, see

same evidence. Id

the case with the lease-purchase agreement between the parties that was the testimony, assessing the credibility of witnesses, and determining the weight of

Finally, we address the respondents’ argument on cross-appeal that the

breach of the NCA was material because the petitioners did not present any The respondents argue that the court lacked evidence to find that Goff’s commerce. See breached the NCA.. court had sufficient evidence to support its finding that Goff materially person could have reached the same decision as the trial court based upon the review is not whether we would rule differently, but whether a reasonable

constituted an “ongoing business relationship.” We are not persuaded. As was We defer to the trial court’s judgment on such issues as resolving conflicts in transaction, and argues that, together, the NCA and the sale of Precision Truck constitute a clear error of law, see McNeal v. Lebel, 157 N.H. 458, 461 (2008). Precision Truck, Goff breached what was the cornerstone of the entire findings of fact and rulings of law unless they lack evidentiary support or Coutinho, 136 N.H. 721, 725 (1993), and we will uphold the trial court’s

remained a single, isolated event rather than an on-going course of trade or

may only be awarded if the breach is material). We conclude that the trial Patch v. Arsenault, 139 N.H. 313, 318 (1995) (rescission and restitution

than the sale itself, violated the CPA. He asserts that by competing with between the parties). outside the CPA notwithstanding the ongoing landlord-tenant relationship

id. (a lease-purchase agreement was an isolated transaction

sufficient to bring it within the ambit of the CPA where the overall transaction at issue contemplated performance by the parties over a period of time is not

Ellis argues that Goff’s conduct after the sale of the business, rather

578. selling and installing truck bed parts, bed linings, etc. Hughes, 143 N.H. at undertaken in the ordinary course of [the respondents’] trade or business” of p. 9 Restatement (Second) of Contracts

material]. must be considered [when determining whether a breach is other can be laid down, and here, . . . all relevant circumstances

significant, no simple rule based on the ratio of the one to the

party as a result of the failure and the contract price may be Although the relationship between the monetary loss to the injured

address the significance of these breaches.

court found “only 8 breaches of the Non-Compete Agreement” and did not

support a finding of material breach justifying restitution because the trial We also reject the respondents’ argument that the evidence does not

breach material, notwithstanding the absence of proof of damages.

May 2006, and that he competed with Precision Truck within weeks of signing

existence of the contract, the trial court had sufficient basis to find Goff’s the NCA itself makes it clear that the promise not to compete is vital to the business without Goff’s covenant not to compete, as set forth herein.” Because

acknowledgement that he proceeded as though the NCA were void as early as circumstances which the trial court considered included Goff’s

The NCA contained the following provision: “Buyer would not acquire the

breach; however, proof of a specific amount of monetary damages established amount of the monetary damages flowing from the

Id. at 439 (emphasis added).

purpose of the contract. so central to the parties’ agreement that it defeated the essential is not required when the evidence establishes that the breach was breach substantially defeats the contract's purpose, or the breach contract or one or more of its essential terms or conditions, the “material” if a party fails to perform a substantial part of the In many cases, a material breach of contract is proved by the

whether a breach is material. emphasis added). The absence of proof of damages is not dispositive of 23 Williston on Contracts § 63:3, at 438-39 (4th ed.) (footnotes omitted;

contract. parties considered the breach as vital to the existence of the is such that upon a reasonable interpretation of the contract, the

object of the parties in entering into the contract.” A breach is touches the fundamental purpose of the contract and defeats the p. 10 10

constituted a material breach. See

DALIANIS, C.J.