Borden, Inc. v. Brower

• Decision Date: 10 October 1973
• Docket Number: No. 1,1
• Citation: 284 N.C. 54,199 S.E.2d 414
• Court: North Carolina Supreme Court
• Parties: BORDEN, INCORPORATED v. James C. BROWER, t/a Harvest Milling Company.

Page 414

199 S.E.2d 414

284 N.C. 54

BORDEN, INCORPORATED v. James C. BROWER, t/a Harvest Milling Company.

No. 1.

Supreme Court of North Carolina.

Oct. 10, 1973.

H. Wade Yates, Asheboro, for defendant appellant.

LeRoy, Wells, Shaw, Hornthal & Riley by L. P. Hornthal, Jr., Elizabeth City, for plaintiff-appellee.

MOORE, Justice.

This appeal poses the sole question: Was defendant's evidence in support of his defenses and counterclaim admissible?

Plaintiff's evidence establishes a prima facie case for an unpaid balance on a promissory note under seal. Plaintiff contends that the material facts set forth in defendant's answer, deposition, and affidavits offered by defendant in opposition to plaintiff's motion for summary judgment were inadmissible in evidence because of the parol evidence rule, and that the trial court properly granted plaintiff's motion for summary judgment.

Affidavits filed in opposition to a motion for summary judgment 'shall set forth such facts as would be admissible in evidence.' G.S. § 1A--1, Rule 56(e). If the pleadings, affidavits, and deposition offered by defendant do not set forth facts that would be admissible in evidence because of the parol evidence rule, then such evidence was properly stricken, and since there remained no genuine issue as to any material fact, the court correctly rendered summary judgment for plaintiff. Singleton v. Stewart, 280 N.C. 460, 186 S.E.2d 400 (1972); Kessing v. Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971).

The parol evidence rule in North Carolina was stated by Chief Justice Stacy in Jefferson Standard Life Insurance Co. v. Morehead, 209 N.C. 174, 183 S.E. 606 (1936), as follows:

'It is well-nigh axiomatic that no verbal agreement between the parties to a written contract, made before or at the time of the execution of such contract, is admissible to vary its terms or to contradict its provisions. (Citing numerous cases.) . . .

'On the other hand, there are a number of seeming exceptions, more apparent than real perhaps, as well established as the rule itself. Roebuck v. Carson, 196 N.C. 672, 146 S.E. 708. . . .'

Chief Justice Stacy then sets out eight exceptions to the rule, citing numerous North Carolina cases for each exception. The third exception is that the parol evidence rule is not violated:

'(B)y showing mode of payment and discharge as contemplated by the parties, other than that specified in the instrument. Bank of Chapel Hill v. Rosenstein, 207 N.C. 529, 177 S.E. 643; Kindler v. Wachovia Bank & Trust Co., 204 N.C. 198, 167 S.E. 811; Wilson v. Allsbrook, 203 N.C. 498, 166 S.E. 313; Stockton v. Lenoir, 198 N.C. 148, 150 S.E. 886; National Bank v. Winslow, 193 N.C. 470, 137 S.E. 320.'

The sixth exception is:

'(B)y showing the whole of a contract, only a part of which is in writing, provided the contract is not one required by law to be in writing and the unwritten part does not conflict with the written. Dawson v. Wright, supra (208 N.C. 418, 181 S.E. 264); Henderson v. Forrest, 184 N.C. 230, 114 S.E. 391; Evans v. Freeman, 142 N.C. 61, 54 S.E. 847.'

Two excellent law review articles, one by Chadbourn and McCormick entitled 'The Parol Evidence Rule in North Carolina,' 9 N.C.L.Rev. 151 (1931), and a sequel by Dalzell, 'Twenty-five Years of Parol Evidence in North Carolina,' 33 N.C.L.Rev. 420 (1955), examine in depth this rule as applied in North Carolina. Chadbourn and McCormick offer the following as a concise and accurate statement of the rule: 'Any or all parts of a transaction prior to or contemporaneous with a writing intended to record them finally are superseded and made legally ineffective by the writing.' 9 N.C.L.Rev. at 152. Professor Stansbury, who is in accord with this statement of the rule, also notes:

'. . . The execution of the final writing may be termed the 'integration' of the transaction. By it all prior and contemporaneous negotiations or agreements, whether oral or written, are 'merged' into the writing, which thus becomes the exclusive source of the parties' rights and obligations with respect to the particular transaction or the part thereof intended to be covered by it.

'The parol evidence rule applies only to writings which relate to a transaction affecting the legal relations between two or more persons, and which are intended wholly or partly to supersede other negotiations and agreements between them. If such a writing is intended to supersede all other agreements relating to the transaction, it may be termed a total or complete integration; if it supersedes only a part, it is a partial integration. In the latter case, those portions of the transaction which were not intended to be superseded are legally effective and therefore may be shown by parol. . . .' 2 Stansbury's N.C. Evidence, Brandis Rev. §§ 251--52 (1973).

Although Professor Dalzell in his law review article is somewhat critical of the North Carolina rule as being too liberal, he does state that while some courts emphasize the protection of the written instrument from invasion, the emphasis in North Carolina is rather in the direction of giving the proponent of the oral agreement a chance to prove that it was made if he can, and that by so doing the North Carolina decisions may sometimes come closer to enforcing the contract that should be enforced than do the more conservative authorities.

Promissory notes are not generally subject to the parol evidence rule to the same extent as other contracts. Parties drawing such instruments tend to follow a rather definitely standardized form. If collateral terms and conditions had been agreed upon, they may be omitted from the note itself to insure its negotiability. Accordingly, it is rather common for a promissory note to be intended as only a partial integration of the agreement in pursuance of which it was given, and parol evidence as between the original parties may well be admissible so far as it is not inconsistent with the express terms of the note. See 3 Corbin on Contracts § 587, at 510 (1960); 2 Stansbury's N.C. Evidence, Brandis Rev. § 256 (1973); Dalzell, Twenty-five Years of Parol Evidence in North Carolina, 33 N.C.L.Rev. at 432--33 (1955).

The North Carolina rule in such cases was stated in Evans v. Freeman, 142 N.C. 61, 54 S.E. 847 (1906)--an often-cited case in which parol evidence was admitted to show that a promissory note was to be paid only to the extent of proceeds received from the sale of patent rights in the maker's stockfeeder--as follows:

'. . . (The parole evidence rule) applies only when the entire contract has been reduced to writing, for if merely a part has been written and the other part has been left in parol, it is competent to establish the latter part by oral evidence provided it does not conflict with what has been written. . . . In such a case there is no violation of the familiar and elementary rule we have before mentioned, because in the sense of that rule the written contract is neither contradicted, added to, nor varied, but leaving it is full force and operation as it has been expressed by the parties in the writing, the other part of the contract is permitted to be shown in order to round it out and present it in its completeness, the same as if all of it had been committed to writing.

'The competency of such evidence for the purpose of establishing the other and unwritten part of the contract, or even of showing a collateral agreement made contemporaneously with the execution of the writing, has been thoroughly settled by the decisions of this court. . . . Applying the rule we have laid down, it has been adjudged competent to show by oral evidence a collateral agreement as to how an instrument for the payment of money should, in fact, be paid, though the instrument is necessarily in writing and the promise it contains is to pay so many dollars. . . .'

Other promissory note cases involving the North Carolina method of payment and discharge exception to the parol evidence rule include: Carroll v. Brown, 228 N.C. 636, 46 S.E.2d 715 (1948) (note to be paid out of profits of a partnership in which maker and payee were engaged); Ripple v. Stevenson, 223 N.C. 284, 25 S.E.2d 836 (1943) (note to be paid out of rents and profits from an office building); Pilot Life Insurance Co. v. Guin, 215 N.C. 92, 1 S.E.2d 123 (1939) (note to be paid out of commissions); Bank of Chapel Hill v. Rosenstein, 207 N.C. 529, 177 S.E. 643 (1935) (co-maker's liability on a note limited to the value of land covered by a deed of trust); Galloway v. Thrash, 207 N.C. 165, 176 S.E. 303 (1934) (note to be paid by crediting it against payee's anticipated share of maker's estate); Willmington Trust Co. v. Wilder, 206 N.C. 124, 172 S.E. 884 (1934) (note to be paid out of proceeds of land when land was sold); Kindler v. Trust Co., 204 N.C. 198, 169 S.E. 811 (1933) (note to be paid out of collateral held by payee and such payment to be credited to an endorser); Wilson v. Allsbrook, 203 N.C. 498, 166 S.E. 313 (1932) (note to be paid out of rents collected by maker); Stack v. Stack, 202 N.C. 461, 163 S.E. 589 (1932) (note to be paid out of proceeds of land); National Bank v. Winslow, 193 N.C. 470, 137 S.E. 320 (1927) (note to be paid out of proceeds from sale of goods); Quin v. Sexton, 125 N.C. 447, 34 S.E. 542 (1899) (note to be paid out of proceeds of another note); Kerchner v. McRae, 80 N.C. 219 (1877) (bond to be credited with the proceeds from sale of cotton). See 12 Am.Jur.2d, Bills and Notes § 1264 (1964); 30 Am.Jur.2d, Evidence § 1061 (1967); Annot. 71 A.L.R. 548, 570--75 (1931); 2 Stansbury's N.C. Evidence, Brandis Rev. § 256 (1973); 3 Strong, N.C.Index 2d, Evidence § 32, at 651 (1967).

In the present case, according to defendant's evidence, customers Parrish and Scott executed notes to plaintiff for merchandise sold by plaintiff's agent to them. At the request of plaintiff's agent, a note from defendant to plaintiff included, for bookkeeping purposes only, the amount of...