DeCarlo v. Gerryco, Inc.

• Decision Date: 01 April 1980
• Docket Number: No. 7912DC759,7912DC759
• Court: North Carolina Court of Appeals
• Parties: Mike F. DeCARLO v. GERRYCO, INC.

Page 370

264 S.E.2d 370

46 N.C.App. 15

Mike F. DeCARLO v. GERRYCO, INC.

No. 7912DC759.

Court of Appeals of North Carolina.

April 1, 1980.

McCoy, Weaver, Wiggins, Cleveland & Raper by Richard M. Wiggins, Fayetteville, for plaintiff-appellee.

Ling & Farran by Stephen D. Ling, Greensboro, for defendant-appellant.

HEDRICK, Judge.

Defendant contends that, if either party was entitled to judgment as a matter of law, it was, and thus the court erred in entering summary judgment for the plaintiff.

While summary judgment is recognized as a "drastic remedy" which must be cautiously used, Taylor v. Lutz-Yelton Heating & Air Conditioning Corp., 43 N.C.App. 194, 258 S.E.2d 399, cert. denied, 298 N.C. 809, 262 S.E.2d 4 (1979), nevertheless, under Rule 56, "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law," summary judgment shall be entered. G.S. § 1A-1, Rule 56(c); Kidd v. Early, 289 N.C. 343, 222 S.E.2d 392 (1976). "The judge's role in ruling on a motion for summary judgment is to determine whether any material issues of fact exist that require trial." Stroup Sheet Metal Works, Inc. v. Heritage, Inc., 43 N.C.App. 27, 30, 258 S.E.2d 77, 79 (1979). The burden of proving that no triable issue of fact exists is on the movant, whose papers are carefully scrutinized while those of the opposing party are indulgently regarded. North Carolina National Bank v. Gillespie, 291 N.C. 303, 230 S.E.2d 375 (1976); Emanuel v. Colonial Life & Accident Insurance Co., 35 N.C.App. 435, 242 S.E.2d 381 (1978).

We agree with the judge and the parties in the present case that the uncontradicted evidence of record discloses there are no genuine issues of fact to be tried. Thus, the only question before us, as before the trial judge, is which party is entitled to judgment as a matter of law. The trial court concluded that the plaintiff was entitled to judgment as a matter of law. We disagree and hold that summary judgment should have been entered for the defendant.

Defendant argues, and plaintiff concedes, that, since the defendant was not a party to either the original contract or the amendment thereto, the only theory upon which plaintiff could prevail is that of adoption that is, that the defendant "adopted" as its own the contract entered into by Brooks and plaintiff. Whether a set of uncontroverted facts establishes an adoption is a question of law for the court. See Moriarity v. Meyer, 21 N.M. 521, 157 P. 652 (1916).

An adoption occurs when the corporation, after coming into existence, accepts the benefits of a contract made prior to incorporation with full knowledge of the contract's provisions. R. Robinson, N.C. Corporation Law, § 2-4 (2d ed. 1974); see also 18 Am.Jur.2d, Corporations §§ 119-123 (1965). The question of whether the corporation had knowledge of the contract is easily determined: If the sole shareholder or the "responsible officers have, or are chargeable with, knowledge" of the agreement, such knowledge will be imputed to the corporation itself. 18 Am.Jur.2d, Corporations § 123 at 665 (1965); accord, Whitten v. Bob King's AMC/Jeep, Inc., 292 N.C. 84, 231 S.E.2d 891 (1977). When knowledge on the part of the corporate entity is made to appear, then "by accepting the benefits the company becomes bound to perform the obligations incident to (the) contract." Beachboard v. Southern Railway Co., 16 N.C.App. 671, 677, 193 S.E.2d 577, 581 (1972), cert. denied, 283 N.C. 106, 194 S.E.2d 633 (1973).

Reference to the record before us establishes beyond peradventure that the defendant corporation is chargeable with knowledge of the contract at issue, as it existed originally and as it was subsequently amended, since the defendant's first president, Joe Brooks, is a party to the instrument. However, the issue of whether the defendant has accepted the contract's benefits is not so readily resolved under the circumstances of this case. Research reveals that the issue most often arises in situations which present, in comparison to this case, clear-cut factual patterns. For example, a promoter of the corporation to be formed enters into a preincorporation agreement with another party to provide initial capital for the enterprise. The promoter thereafter becomes a responsible officer of the company, and the company uses the money advanced by the outside party. In that situation, the corporation will be held to have accepted the benefits of the preincorporation contract, with full knowledge of its provisions. Thus, the company will be liable to perform the obligations incident to the contract. See Whitten v. Bob King's AMC/Jeep, Inc., supra. See also Chartrand v. Barney's Club, Inc., 380 F.2d 97 (9th Cir. 1967).

Other situations similarly susceptible of relatively ready resolution involve contracts to lease property into which the corporate body ultimately moves; or to buy land which the corporation thereafter uses; or to employ a person in a particular position at a specified salary whose services the company does indeed use. See, e. g., cases cited at 18 Am.Jur.2d, Corporations § 122 (1965); Annot., 123 A.L.R. 726 (1939); Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E.2d 282 (1976); McCrillis v. A & W Enterprises, Inc., 270 N.C. 637, 155 S.E.2d 281 (1967). The benefits available to the corporation in such circumstances are obvious and, when the corporation avails itself of such benefits, it thereby adopts the contract to which they are incident.

Although we have discovered no North...