O'Grady v. First Union Nat. Bank

• Decision Date: 29 December 1978
• Docket Number: No. 25,25
• Citation: 250 S.E.2d 587,296 N.C. 212,26 UCC Rep. 146
• Court: North Carolina Supreme Court
• Parties: , 26 UCC Rep.Serv. 146 Thomas O'GRADY, James R. Pridemore, Peter MacQueen, III, and Mary G. MacQueen, Plaintiffs, v. FIRST UNION NATIONAL BANK of North Carolina, Defendant and Third PartyPlaintiff. BANK of NORTH CAROLINA, N.A., Defendant, v. Jack F. STEWART and Wayne C. Huddleston, Third Party Defendants.

Page 587

250 S.E.2d 587

296 N.C. 212, 26 UCC Rep.Serv. 146

Thomas O'GRADY, James R. Pridemore, Peter MacQueen, III, and Mary G. MacQueen, Plaintiffs, v. FIRST UNION NATIONAL BANK of North Carolina, Defendant and

Third PartyPlaintiff.

BANK of NORTH CAROLINA, N.A., Defendant, v. Jack F. STEWART and Wayne C. Huddleston, Third Party Defendants.

No. 25.

Supreme Court of North Carolina.

Dec. 29, 1978.

Crossley & Johnson by Robert White Johnson, Wilmington, for plaintiffs-appellants.

Parker, Rice & Myles by Charles E. Rice, III, Wilmington, for First Union Nat. Bank of North Carolina, defendant-appellee.

MOORE, Justice.

The case was tried in the absence of a jury. A Rule 50(a) motion for directed verdict is appropriate only to a case tried before a jury. In non-jury trials Rule 41(b), Involuntary Dismissal, provides for a procedure whereby, at the close of the plaintiff's evidence, the judge can give judgment against the plaintiff, not only because his proof has failed to make out a case (as is permitted under Rule 50), but also on the basis of facts as the judge may then determine them. See Helms v. Rea, 282 N.C. 610, 194 S.E.2d 1 (1973). In Helms v. Rea, supra, Justice Sharp (now Chief Justice) noted that if the trial judge defers ruling on a Rule 41(b) motion until the close of all the evidence, there would be little point for counsel to renew the motion, for at that stage of a non-jury trial the judge must, pursuant to Rule 52, determine the facts in any event. Whether the trial judge decides the case on a motion for dismissal or at the close of all the evidence, he must, as required by Rule 52, separately make findings of fact, state his conclusions of law, and enter judgment accordingly. See Helms v. Rea, 282 N.C. at 619, 194 S.E.2d 1. See also Hinson v. Jefferson, 287 N.C. 422, 215 S.E.2d 102 (1975); Wright, Law of Federal Courts, sec. 96, at pp. 477-78 (1976). Though the trial judge in present case ruled under Rule 50, we will consider his findings and judgment as an adjudication on the merits under Rule 52.

The trial judge failed to make findings of fact as required by Rule 52. Instead, in his conclusions, he ruled that "there are no factual disputes as to the matters and issues of law raised by the pleadings and evidence in this case." In light of certain conflicting evidence in the record, this ruling was erroneous. Due to the trial court's failure to find facts concerning this conflicting evidence, and because of its failure to admit and weigh other evidence sought to be introduced by the plaintiffs, a new trial will be required.

Under their first assignment of error plaintiffs O'Grady and MacQueen argue that the trial court erred in refusing to allow the plaintiffs to testify that the collateral security which they furnished was contingent upon Jack and Flora Stewart's being liable on the debt. The plaintiff, O'Grady, would have testified, if permitted, that he ordered the letter of credit issued only on condition that the Stewarts remain liable on the note. Plaintiffs MacQueen would have testified, if permitted, that they executed the guaranty agreement on the same condition. The Court of Appeals upheld the trial court's rulings on grounds that parol evidence will be admitted to prove a condition precedent only when such condition is communicated to the obligee of the contract, and that, since the evidence shows that O'Grady and the MacQueens did not expressly communicate the alleged condition to defendant First Union, the trial court properly excluded plaintiffs' testimony.

The opinion by the Court of Appeals correctly and succinctly summarizes the law concerning the admissibility of parol evidence to prove the existence of prior conditions which would render an executed written contract inoperative or unenforceable due to failure of occurrences of conditions precedent. See Lane v. Coe, 262 N.C. 8, 136 S.E.2d 269 (1964); Bailey v. Westmoreland, 251 N.C. 843, 112 S.E.2d 517 (1960); Perry v. Trust Co., 226 N.C. 667, 40 S.E.2d 116 (1946); Overall Co. v. Hollister Co., 186 N.C. 208, 119 S.E. 1 (1923); Wigmore on Evidence, § 2410 (3d Ed.); Stansbury, North Carolina Evidence § 257 (Brandis rev. 1973). We must, however, take issue with the Court of Appeals' application of that law to the facts of this case.

We first consider the document entitled "Unconditional Guaranty" signed by Peter and Mary MacQueen. According to the uncontested evidence, Peter MacQueen was present on 3 April at the signing of the note of that date. He witnessed the signatures of Jack and Flora Stewart, James Pridemore, and Wayne Huddleston to the note. It was agreed that MacQueen would guarantee the note of 3 April to the extent of $7,500 and bank officials gave him a guaranty form, instructing him to sign it and return it to the Wilmington office. On 8 April both MacQueen and his wife signed the document and filled in the amount of $7,500. They left the section at the top of the form, headed "Primary Obligor(s)," blank. This document was then delivered to Robert Helms at First Union in Wilmington. Mr. Helms testified that, in the MacQueens' presence he wrote in the names "Jack F. Stewart, James R. Pridemore, Wayne C. Huddleston." The MacQueens testified that the names of the primary obligors were not inserted in their presence, and that, based on their observations of the four people signing the note on 3 April, they intended to guarantee a loan to those four people only. Mr. MacQueen, however, admitted that he had not expressly told anyone at First Union that he would guarantee a loan only to the four people signing the note of 3 April.

The MacQueen guaranty is a continuing guaranty of payment. A guaranty is a promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another person who is himself liable in the first instance for such payment or performance. Cowan v. Roberts, 134 N.C. 415, 46 S.E. 979 (1904). A guaranty of payment, as opposed to a guaranty of collection, is an absolute promise to pay the debt of another at maturity if not paid by the principal debtor. Investment Properties v. Norburn, 281 N.C. 191, 188 S.E.2d 342 (1972). The right to sue upon an absolute guaranty of payment arises immediately upon the failure of the principal debtor to pay at maturity. Milling Co. v. Wallace, 242 N.C. 686, 89 S.E.2d 413 (1955). Whereas a guaranty which covers a single debt is specific, a guaranty which covers a series of extensions of credit or a succession of transactions is continuing. Novelty Co. v. Andrews, 188 N.C. 59, 123 S.E. 314 (1924). See Simpson on Suretyship, § 6 (1950); Lee, N.C. Law of Suretyship, § 2 (5th Ed. 1977).

Though a special law of guaranty has developed to answer specific problems inherent in these sorts of agreements, contracts of guaranty are subject to the more general law of contract when not otherwise provided. The signing of a blank or incomplete guaranty form is a matter controlled by the law of contract.

Plaintiffs MacQueen argue that the guaranty agreement signed by them is not binding because Mrs. Stewart's name is not included among the guaranty's "primary obligors," those persons whose debts the agreement guaranteed. They further argue that, if the guaranty is valid, then it cannot be applied to cover a default on the note of 9 April, since Jack Stewart is not liable on that note due to plaintiff Pridemore's unauthorized signature. Defendant First Union argues that the guaranty is valid, for it was never expressly told that Mrs. Stewart had to be listed as a primary obligor on the guaranty. First Union further argues that the guaranty applies to the note of 9 April even though Mrs. Stewart did not sign, and even though Jack Stewart may not be liable on that note (which it does not admit), for the guaranty, by its terms, applies to both the collective and individual debts of the primary obligors.

We deal first with the question of the validity of the guaranty agreement. It is clear that a valid contract may be signed in blank and substantial terms filled in at a later date at the direction of the signer. On the other hand, it has been held that, where no delegation of authority is conferred to supply a defect, a signature to an incomplete paper or contract does not bind the signer without further assent on his part to a party's completion of the instrument. Richards v. Day, 137 N.Y. 183, 33 N.E. 146; Campbell v. WABC Towing Corp., 78 Misc.2d 671, 356 N.Y.S.2d 455. Cf. Bank v. Corbett, 271 N.C. 444, 156 S.E.2d 835 (1967). Furthermore, when there has been a delegation of authority to complete essential terms of an instrument pursuant to an understanding regarding those terms, a party's completion of terms that is contrary to the signer's authorization is not, between the parties, binding on the signer. See Regal Music Co. v. Hirsch, 16 Misc.2d 365, 183 N.Y.S.2d 474; Reilley Bros. v. Thompson, 127 Neb. 683, 256 N.W. 642; C. I. T. Corporation v. Glennan, 137 Cal.App. 636, 31 P.2d 430. See also 17 Am.Jur.2d, Contracts § 73. (Cf. Creasman v. Savings & Loan Assoc., 279 N.C. 361, 183 S.E.2d 115 (1971), where a different rule applies to the signing of blank instruments when the rights of third parties are involved.) These rules follow from the more general principle of contract that, in order that there may be a valid and enforceable contract between parties, there must be a meeting of the minds of the contracting parties upon all essential terms and conditions of the contract. See Horton v. Refining Company, 255 N.C. 675, 122 S.E.2d 716 (1961); Elks v. Insurance Co., 159 N.C. 619, 75 S.E. 808 (1912).

In present case Mr. MacQueen, if permitted, would have testified that a condition of his executing a conditional letter of endorsement was that Jack and Flora Stewart remain liable on the note, or loan, of 3 April. Mr. MacQueen did testify that he intended to guarantee the joint debt of all those who signed the note of 3 April in his...