Spartan Leasing Inc. v. Pollard

Decision Date05 February 1991
Docket NumberNo. 9013SC359,9013SC359
Citation101 N.C.App. 450,400 S.E.2d 476
PartiesSPARTAN LEASING INC. of North Carolina, Plaintiff, v. Burnett POLLARD, d/b/a Beaver Dam Logging, and Long Leaf Wood Products, Inc., Defendants.
CourtNorth Carolina Court of Appeals

Murchison, Taylor, Kendrick, Gibson & Davenport by Reid G. Hinson, Wilmington, and Grier and Grier, P.A. by Richard C. Belthoff, Jr., Charlotte, for plaintiff-appellee.

Stevens, McGhee, Morgan, Lennon & O'Quinn by Alan E. Toll, Wilmington, for defendants-appellants.

JOHNSON, Judge.

This is an action by plaintiff-appellee Spartan Leasing, Inc. ("Spartan"), lessor, to hold defendant-appellant Long Leaf Wood Products, Inc. ("Long Leaf"), liable as guarantor on the lease of a "logging skidder" by defendant-below Burnett Pollard, doing business as Beaver Dam Logging ("Pollard"). The action was filed in Mecklenburg County on 22 November 1988. Defendant Pollard filed no answer and an entry of default was entered against him on 13 February 1989. Defendant Long Leaf answered, asserting defenses and counterclaims against Spartan and a crossclaim against Pollard. Long Leaf moved for change of venue and the case was transferred to Brunswick County for the convenience of the witnesses. Spartan moved for summary judgment. Defendant Long Leaf appeals from the granting of summary judgment in favor of Spartan on all of Spartan's claims against both defendants and against Long Leaf's counterclaims. Defendant Pollard is not a party to this appeal.

The forecast of evidence, as taken from the verified pleadings, answers to interrogatories and affidavits of the parties and witnesses, would tend to show the following.

During the summer of 1987, Payton Warren, Customer Sales Representative for Spartan, contacted Steve Hutchison, president of Long Leaf, about the possibility of Long Leaf purchasing a skidder from Spartan. Hutchison informed Warren that Long Leaf was not interested in purchasing a skidder but suggested that Spartan contact Burnett Pollard, who was doing contract work for Long Leaf at the time. During the negotiations with Pollard, Spartan determined that they would not lease a skidder to Pollard unless Hutchison, individually, and as president of Long Leaf, unconditionally guaranteed the equipment lease. Spartan alleges that Hutchison agreed to obligate Long Leaf as guarantor but would not do so in his individual capacity. Spartan further alleges that they finally agreed that Hutchison's guarantee as president of Long Leaf would be sufficient. Hutchison alleges that he refused to guarantee Pollard's obligation in either his individual capacity or as president of Long Leaf. He did, however, agree to pay Pollard's lease payment directly to Spartan from monies owed Pollard by Long Leaf, with Pollard's permission. On 14 July 1987, Pollard signed a 36 month lease of the skidder. That same day, Pollard and Hutchison executed a "Guaranty" which neither of them read before signing.

The skidder broke down in October 1987. Pollard was not working at that time and could not pay the repair cost. Spartan arranged to have the skidder fixed for a cost of $6,500 and thereafter presented an "Addendum Letter" which both Pollard and Hutchison signed. The letter was an agreement that the amount of the monthly payments was increased to $2,750 per month to include the repair cost plus interest. Pollard signed on the line marked "Lessee." Hutchison signed on the line marked "Guarantor: Long Leaf Wood Products, Inc., Steve Hutchison, President."

In January 1988, Pollard failed to make payment on the lease. On 1 July 1988, Spartan accelerated the debt and repossessed the skidder. Spartan bought the skidder for $40,000 at public auction on 24 August 1988 and then brought suit against Pollard and Long Leaf to collect the deficiency. Long Leaf answered and set up various defenses. Pollard filed no answer and an entry of default was entered against him on 14 February 1989 by the clerk of superior court of Mecklenburg County. Pollard's motion to set aside the entry of default was denied by Judge Clark on 27 November 1989 and on that same day Judge Clark entered summary judgment for Spartan.

On appeal, Long Leaf contends that the trial court: (1) erred in granting summary judgment against Long Leaf on its defense that its signature on the guaranty was obtained by trick or fraud, (2) erred in granting summary judgment on the issue whether Long Leaf is entitled to a setoff due to the negligent repair of the skidder, and (3) erred in dismissing Long Leaf's counterclaim for unfair and deceptive trade practices.

I.

First, defendant contends that the trial court erred in granting summary judgment in favor of Spartan on Long Leaf's claim that Hutchison's signature on the guarantee was obtained by trick or fraud.

Defendant's evidence consists of affidavits by Hutchison and Pollard. In his affidavit Hutchison states:

On July 14th Pollard said it was O.K. for me to pay his money directly to Spartan Leasing and [Warren] said that his company wanted me to sign a paper indicating Pollard had agreed to [Long Leaf] sending the payments directly to Spartan. It was then that [Warren] produced a paper. He said his Company required this paper work and asked Pollard and I [sic] to sign it. It was signed on the hood of my truck ... [Warren] led me to believe that I was signing an agreement to send payments directly to Spartan on behalf of Pollard.

Pollard stated in his affidavit:

At [Warren's] request, both Steve Hutchison and myself signed a document on the hood of Steve's car as we left the work site in Leland, North Carolina. At the time we signed the document, [Warren] indicated that this was "paperwork the Company required" and told both Steve and myself it was to show that I agreed that he could deduct the payments from my payroll and pay them directly to Spartan.

In fact, the document signed that day was an unconditional guaranty on a single typewritten page with the word "GUARANTY" printed prominently at its top. Hutchison signed his name on an empty line marked " , President." The words "Signature of Guarantor; Long Leaf Wood Products, Inc." appeared under the line. Another line marked "Signature of Guarantor: Steven M. Hutchison" was left blank. Neither Pollard nor Hutchison received a copy of the paper they signed.

The granting of a summary judgment motion is appropriate where there are no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. G.S. § 1A-1, Rule 56. Defendant contends that the trial court's granting of summary judgment on their defense of fraud was improper because there remained genuine issues of material fact to be resolved, namely whether Warren made a factual misrepresentation to Hutchison and whether Hutchison reasonably relied on it. We disagree.

The essential elements of fraud are:

(1) that defendant made a representation relating to some material past or existing fact; (2) that the representation was false; (3) that when he made it, defendant knew that the representation was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that defendant made the representation with intention that it should be acted upon by plaintiff; (5) that plaintiff reasonably relied upon the representation, and acted upon it; and (6) that plaintiff thereby suffered injury.

Cofield v. Griffin, 238 N.C. 377, 379, 78 S.E.2d 131, 133 (1953).

As regards the first element, the fraudulent misrepresentation must be of a subsisting or ascertainable fact. Berwer v. Insurance Co., 214 N.C. 554, 200 S.E. 1 (1938). Generally, the misrepresentation must be definite and specific, New Bern v. White, 251 N.C. 65, 110 S.E.2d 446 (1959), "but the specificity required depends upon the tendency of the statements to deceive under the circumstances." Ragsdale v. Kennedy, 286 N.C. 130, 139, 209 S.E.2d 494, 500 (1974). Defendant contends that prior to Hutchison signing the guaranty, Spartan had requested that he (Hutchison) guarantee the lease, both individually and as president of Long Leaf and that he had refused. Defendant's evidence further showed that Hutchison had, however, agreed to forward directly to Spartan as monthly lease payments, monies that Long Leaf owed Pollard. On 14 July, after Pollard gave Hutchison permission to forward his money directly to Spartan, Warren produced the guarantee and requested that Pollard and Hutchison sign it. Hutchison alleges: "[Warren] led me to believe that I was signing an agreement to send payments directly to Spartan on behalf of Pollard." Pollard, by affidavit, alleges that at the time they signed the document, Warren "indicated that this was 'paperwork the Company required' and told both [Hutchison] and myself it was to show that I agreed that he could deduct the payments from my payroll and pay them directly to Spartan." Neither Hutchison nor Pollard alleges definite and specific misrepresentations by Warren that the paper in question was an agreement to forward the lease payments.

We find, however, that we need not decide whether defendant's allegations as to misrepresentation are sufficient to survive a summary judgment motion because we find that defendant's forecast of evidence on the element of reasonable reliance is insufficient as a matter of law.

One to whom a definite representation has been made is entitled to rely on that representation if the representation is of a character to induce action by a person of ordinary prudence and is reasonably relied upon. Fox v. Southern Appliances, Inc., 264 N.C. 267, 141 S.E.2d 522 (1965). A person signing a written instrument is under a duty to read it and ordinarily is charged with knowledge of its contents. Mills v. Lynch, 259 N.C. 359, 130 S.E.2d 541 (1963). These rules apply to the non-fiduciary relationship as exists between a creditor and a guarantor. International Harvester Credit Corp. v. Bowman, 69 N.C.App. 217, ...

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