Hansen v. DHL Laboratories, Inc.

• Decision Date: 04 October 1994
• Docket Number: No. 2251,2251
• Citation: 450 S.E.2d 624,316 S.C. 505
• Court: South Carolina Court of Appeals
• Parties: Floyd HANSEN, Appellant, v. DHL LABORATORIES, INC., John F. Ladley and R.S. Dickson & Co., d/b/a Ruddick Investment Co., and R. Stuart Dickson, Defendants, Of Whom DHL Laboratories, Inc., is Respondent. . Heard

Page 624

450 S.E.2d 624

316 S.C. 505

Floyd HANSEN, Appellant, v. DHL LABORATORIES, INC., John F. Ladley and R.S. Dickson &

Co., d/b/a Ruddick Investment Co., and R. Stuart

Dickson, Defendants,

Of Whom DHL Laboratories, Inc., is Respondent.

No. 2251.

Court of Appeals of South Carolina.

Heard Oct. 4, 1994.

Decided Oct. 31, 1994.

Rehearing Denied Dec. 6, 1994.

G. Randall Taylor, of Butler, Means, Evins & Browne, Spartanburg, for appellant.

William U. Gunn, of Holcombe, Bomar, Cothran & Gunn, Spartanburg, for respondent.

HOWELL, Chief Judge:

Floyd Hansen appeals from an order granting partial summary judgment in favor of DHL Laboratories, Inc. (DHL) on DHL's action to collect certain promissory notes signed by Hansen. We affirm.

I.

Hansen was a shareholder and President of DHL. After DHL removed Hansen as President and Chairman of the Board in 1991, Hansen brought suit against DHL, alleging, inter alia, breach of contract and tortious interference with a contractual relationship. In its answer, DHL raised counterclaims seeking judgment on four promissory notes given by Hansen to DHL. In his reply and during discovery, Hansen admitted signing the notes, but claimed that the loan proceeds were really additional compensation structured as loans to avoid tax liability. Hansen claimed that there was never any intention that he repay the notes.

DHL moved for summary judgment as to its counterclaims, supporting its motion with Hansen's deposition and his responses to DHL's Requests to Admit. DHL argued that any evidence Hansen may have to show that the loans were disguised compensation was inadmissible under the parol evidence rule. Hansen contended that his evidence was admissible as evidence of fraudulent inducement, an exception to the parol evidence rule.

By order dated October 15, 1993, the court granted partial summary judgment in favor of DHL. The court held that Hansen did not properly plead the required elements of fraud in his original reply or in his amended reply. In addition, the court characterized Hansen's claims as alleging a promise by DHL not to collect the notes in the future. Because fraud cannot be predicated on unfulfilled promises, the court held that Hansen's allegations did not amount to fraud as a matter of law. Hansen's evidence that the loans were disguised compensation and that he had no obligation to repay the loans was therefore inadmissible under the parol evidence rule. The court granted DHL summary judgment on three of the four notes. ¹

II.

On appeal, Hansen argues that his pleadings and deposition, as well as his affidavit submitted to the court at the summary judgment hearing, show that DHL fraudulently induced him to sign the promissory notes, thus creating an exception to the parol evidence rule. Hansen argues that because DHL did not submit any affidavits contradicting Hansen's claims, summary judgment was inappropriate. The lower court held, however, that Hansen's allegations did not amount to fraud as a matter of law, and that the parol evidence rule barred any evidence contradicting the terms of the promissory notes. We agree.

Generally, the parol evidence rule prohibits the admission of evidence to contradict or add to the terms of a clear and unambiguous contract. Allen-Parker Co. v. Lollis, 257 S.C. 266, 185 S.E.2d 739 (1971); Ray v. South Carolina Nat. Bank, 281 S.C. 170, 314 S.E.2d 359 (Ct.App.1984); However, "if the writing was procured by words and with a fraudulent intent of the party claiming under it, then parol evidence is competent to prove the facts which constitute the fraud." Lollis, 257 S.C. at 272, 185 S.E.2d at 742. Therefore, if Hansen's pleadings raise an issue of fraudulent inducement, parol evidence would be admissible to show that he was not liable on the notes.

We agree with the trial court that Hansen's allegations do not amount to fraud as a matter of law. To be actionable, a fraudulent misrepresentation must relate to a pre-existing fact. Unfulfilled promises or statements as to future events do not amount to fraud. Moye v. Wilson Motors, Inc., 254 S.C. 471, 176 S.E.2d 147 (1970); Davis v. Upton, 250 S.C. 288, 157 S.E.2d 567 (1967). However, if at the time the promise is made, the party making the promise has no intention of keeping it, the promise then amounts to an actionable fraudulent misrepresentation of fact. Moye, 254 S.C. at 480-81, 176 S.E.2d at 152; Davis, 250 S.C. at 292, 157 S.E.2d at 568.

In his first reply to DHL's counterclaims, Hansen stated that, as to each note:

Plaintiff [Hansen] would further show that DHL intended Plaintiff to have the funds represented by the said note as additional compensation and that the transaction was structured as a loan so as to minimize or eliminate income tax liability for Plaintiff. Plaintiff would further show that it was the intention of the parties that Plaintiff would not be required to repay the purported indebtedness evidenced by the said note.

In his affidavit submitted in opposition to DHL's summary judgment motion, Hansen stated:

4. Specifically, all sums of money paid to me pursuant to any promissory notes ... were intended as additional compensation to me for services rendered and were in lieu of any salary, salary increases or bonuses.

5. It was the understanding, agreement and intention of all concerned that all monetary payments to me pursuant to any promissory notes were in lieu of salary increases and/or bonuses and were set up as loans simply for tax reasons.

At the summary judgment hearing, DHL argued that Hansen's evidence was inadmissible under the parol evidence rule. It was then that Hansen first raised the fraud exception to the parol evidence rule. After the hearing, and without leave of the court, Hansen submitted a pleading purporting to be an amended reply. In this amended reply, Hansen changed his allegations slightly, stating that:

Plaintiff [Hansen] would further show that DHL represented to Plaintiff that the funds represented by the said note were additional compensation and that the transaction was structured as a loan so as to minimize or eliminate income tax liability for Plaintiff. Plaintiff would further show that he was fraudulently induced into signing the promissory note as a result of the Defendant's promise that Plaintiff would not be required to repay the purported indebtedness evidenced by the said note.

The conduct Hansen describes simply does not amount to fraud. All the evidence before the court shows is that DHL made a promise to Hansen and the promise has not been kept. There is no allegation or indication that DHL did not intend to keep the promise at the time it was made. ² While DHL may have breached a promise to Hansen, a breach of promise alone does not constitute fraud. Davis, 250 S.C. at 292-93, 157 S.E.2d at 569. Therefore, when viewed in the light most favorable to him, Hansen's claim as a matter of law does not raise an issue of fraud.

As to the note governed by North Carolina law, ³ Hansen likewise has not stated a defense of fraudulent inducement. North Carolina law on this point is essentially the same as South Carolina law--evidence of fraudulent inducement is an exception to the parol evidence rule. See Fox v. Southern Appliances, Inc., 264 N.C. 267, 141 S.E.2d 522 (1965) (parol evidence is admissible to show that a written contract was procured by fraud); accord Chapel Hill Spa Health Club, Inc. v. Goodman, 90 N.C.App. 198, 368 S.E.2d 60 (Ct.App.1988). However, an unperformed promise does not constitute fraud absent evidence that the promisor did not intend to keep the promise at the time he made it. Britt v. Britt, 320 N.C. 573, 359 S.E.2d 467 (1987), overruled in part on other grounds, Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 374 S.E.2d 385 (1988). Thus, under North Carolina law, Hansen's claim does not amount to fraud.

Summary judgment is appropriate only when it is clear that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Cafe Associates, Ltd. v. Gerngross, 305 S.C. 6, 406 S.E.2d 162 (1991). A genuine issue of fact, however, can be created only by evidence which would be admissible at trial. Rule 56(e), SCRCP; Englert, Inc. v. The Netherlands Ins. Co., --- S.C. ----, 433 S.E.2d 871 (Ct.App.1993); Old Southern Life Ins. Co. v. Bank of North Carolina, N.A., 36 N.C.App. 18, 244 S.E.2d 264 (Ct.App.1978) (to defeat summary judgment, party opposing the motion must present competent evidence which would be admissible at trial which shows that a genuine issue of fact exists); Emerson v. Great Atl. & Pac. Tea Co., Inc., 41 N.C.App. 715, 255 S.E.2d 768 (Ct.App.), review denied, 298 N.C. 202 (1979). Because the conduct complained of by Hansen does not amount to fraud, there is no applicable exception to the parol evidence rule. Hansen's evidence of the nature of the loan transactions contradicts the clear and unambiguous language of the promissory notes and is therefore inadmissible under the parol evidence rule. Ray v. South Carolina Nat. Bank, 281 S.C. 170, 314 S.E.2d 359 (Ct.App.1984); Bank of Varina v. Slaughter, 250 N.C. 355, 108 S.E.2d 594 (1959) (parol evidence inadmissible to show that defendants would not be liable on promissory note executed by defendants). Without Hansen's evidence of the nature of the loan transactions, there is no genuine issue of material fact--Hansen admitted signing the promissory notes, and those notes have not been paid. Summary judgment was therefore proper. See Moss v. Porter Bros., Inc., 292 S.C. 444, 357 S.E.2d 25 (Ct.App.1987) (summary judgment proper in contract action where affidavits submitted in opposition contained evidence inadmissible under the parol evidence rule).

III.

Moreover, even if DHL's conduct did amount to fraud, we agree with...