Stancil v. Stancil

• Decision Date: 20 June 1989
• Docket Number: No. 887SC975,887SC975
• Citation: 380 S.E.2d 424,94 N.C.App. 319
• Court: North Carolina Court of Appeals
• Parties: , 9 UCC Rep.Serv.2d 1323 Bruce STANCIL, Plaintiff, v. Howard STANCIL, Defendant.

Page 424

380 S.E.2d 424

94 N.C.App. 319, 9 UCC Rep.Serv.2d 1323

Bruce STANCIL, Plaintiff, v. Howard STANCIL, Defendant.

No. 887SC975.

Court of Appeals of North Carolina.

June 20, 1989.

Lee, Reece & Weaver by W. Earl Taylor, Jr. and Cyrus F. Lee, and Lane & Boyette by Wiley L. Lane, Jr., Wilson, for plaintiff.

Narron, Holdford, Babb, Harrison & Rhodes, P.A. by William H. Holdford, Wilson, for defendant.

JOHNSON, Judge.

The evidence contained in the record on appeal of this matter tends to show the following. Plaintiff, Bruce Stancil, and his brother, defendant Howard Stancil, each own fifty percent of the 25,000 shares of stock of Bruce Stancil Refrigeration, Inc., a North Carolina close corporation. Bruce Stancil started the business in the 1960's and incorporated it in 1973. In 1980, defendant Howard Stancil became associated with the corporation, working in the office. At that time the parties also orally agreed that defendant would purchase a fifty percent interest in the business for $35,000. Relations between the brothers deteriorated, and in 1984 defendant quit working at the corporation.

This action, instituted by plaintiff on 29 October 1986, is one of four civil actions between the parties arising out of disputes concerning the corporation. In this action, plaintiff alleges that one of the terms of his oral agreement to sell stock to defendant was that plaintiff would have the right to repurchase defendant's interest in the corporation at the price of $35,000 in the event that defendant did not, or could not, satisfactorily perform his duties as office manager and bookkeeper of the business; or if defendant left the company and no longer worked there; or if the parties became unable to work together in an agreeable manner. Plaintiff sues to compel specific performance of this alleged contract. Plaintiff claims in his affidavit to have written a memorandum of the contract after it was agreed upon, which he claims both parties signed. He alleges that the writing has been lost or misplaced.

On 24 May 1988, defendant moved for summary judgment. On 27 May 1988, he filed a motion to amend his answer and a motion for judgment on the pleadings. On 13 June 1988, the trial court entered an order allowing defendant to amend his answer to raise the affirmative defense that the alleged oral agreement is unenforceable because it fails to satisfy the requirement of the statute of frauds provision, G.S. sec. 25-8-319, that sales of securities be evidenced by a writing. On the same date, the court granted defendant's motion for summary judgment, and plaintiff gave notice of appeal from the order.

Plaintiff's sole contention on appeal is that the trial court erred in granting defendant's motion for summary judgment and concluding that defendant is entitled to judgment as a matter of law.

The granting of summary judgment is appropriate only 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." G.S. sec. 1A-1, Rule 56(c); Kessing v. Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971). In ruling on this motion, the court must consider the evidence in the light most favorable to the nonmovant, Durham v. Vine, 40 N.C.App. 564, 253 S.E.2d 316 (1979), and give to that party the benefit of all inferences which may reasonably be drawn in his favor. Caldwell v. Deese, 288 N.C. 375, 218 S.E.2d 379 (1975).

Our review of the record which was before the trial court in ruling on defendant's motion for summary judgment reveals that the parties agree that they had an oral agreement whereby defendant was to purchase a one-half interest in the corporation for $35,000. The parties disagree about other relevant facts. Plaintiff claims that defendant has only paid him $20,000 and defendant states that he has paid the full amount. Also, defendant contends that there was no provision for plaintiff to repurchase the stock as outlined above. These issues of whether the repurchase provision existed and whether defendant paid the full purchase price of the stock are certainly disputes as to material facts. Summary judgment is an extreme remedy and is appropriate only when the truth is quite clear. Lee v. Shor, 10 N.C.App. 231, 178 S.E.2d 101 (1970). When the determination of a material fact turns on the credibility of witnesses, as here, summary judgment is improper. Commercial Credit Corp. v. McCorkle, 19 N.C.App. 397, 198 S.E.2d 736 (1973); Lee, supra.

In ruling on defendant's summary judgment motion, the question for the trial court was whether defendant had established a complete defense to plaintiff's claim, thereby making summary judgment appropriate. Ballinger v. North Carolina Dep't of Revenue, 59 N.C.App. 508, 296 S.E.2d 836 (1982), disc. rev. denied, 307 N.C. 576, 299 S.E.2d 645 (1983).

Defendant argues in his brief that he has a complete defense in G.S. sec 25-8-319, the statute of frauds provision which requires that a contract for the sale of securities be evidenced by a writing. Defendant urges us to apply the rule of Oakley v. Little, 49 N.C.App. 650, 272 S.E.2d 370 (1980). Oakley held that the plaintiff's failure to produce a writing sufficient to show a contract for the sale of shares of stock in a corporation was a complete defense pursuant to G.S. sec. 25-8-319(a). Id. We decline to follow Oakley, and believe, rather, that we are bound by the more recent Supreme Court decision of Penley v. Penley, 314 N.C. 1, 332 S.E.2d 51 (1985). Before turning to the Penley decision, we note that approximately two years before Penley, our Supreme Court, in Meiselman v. Meiselman, 309 N.C. 279, 307 S.E.2d 551 (1983), acknowledged the distinctions between publicly held corporations and close corporations. See Note, Shareholder Agreements-Oral Agreements in Close Quarters-Penley v. Penley, 22 Wake Forest L.Rev. 147 (1987). Meiselman recognized that "[c]lose corporations are often little more than incorporated partnerships." Meiselman, 309 N.C. at 288, 307 S.E.2d at 557, quoting Comment, Oppression as a Statutory Ground for Corporate Dissolution, 1965 Duke L.J. 128, 138 (1965) (citations omitted). In remanding the case for an evidentiary hearing to determine the "rights or interests" of the minority shareholder, the Court also stated that such corporations are often "based on personal relationships that give rise to certain 'reasonable expectations' on the part of those acquiring an interest in the close corporation." Id. at 289, 307 S.E.2d at 558.

In the wake of Meiselman, the Court in Penley held that an oral agreement between a husband and wife, made prior to incorporation, to share equally in the close corporation, was enforceable on...