Zinn v. Walker, 8715SC91

• Decision Date: 20 October 1987
• Docket Number: No. 8715SC91,8715SC91
• Citation: 361 S.E.2d 314,87 N.C.App. 325
• Parties: Carol Ann ZINN v. Philip E. WALKER.
• Court: North Carolina Court of Appeals

Page 314

361 S.E.2d 314

87 N.C.App. 325

Carol Ann ZINN v. Philip E. WALKER.

No. 8715SC91.

Court of Appeals of North Carolina.

Oct. 20, 1987.

Faison, Brown, Fletcher & Brough by O. William Faison and Reginald B. Gillespie, Jr., Durham, for plaintiff-appellant/appellee.

Bagwell & Associates by O. Kenneth Bagwell, Jr. and Philip S. Adkins, Chapel Hill, for defendant-appellant/appellee.

WELLS, Judge.

Defendant's Appeal

Defendant brings forward four assignments of error each of which concern the enforceability of the Resale Profits Agreement.

In his first assignment of error defendant contends that the evidence does not support the jury's answer to the first issue regarding the enforceability of the Resale Profits Agreement. Relying on Housing, Inc. v. Weaver, 305 N.C. 428, 290 S.E.2d 642 (1982) and Boyce v. McMahan, 285 N.C. 730, 208 S.E.2d 692 (1974), defendant argues that the Resale Profits Agreement constituted nothing more than an agreement to agree. "A contract to enter into a future contract must specify all its material and essential terms." Boyce at 734, 208 S.E.2d at 695. "If any portion of the proposed terms is not settled, or no mode agreed upon by which they may be settled, then there is no agreement." Boyce, supra, quoted in Weaver, supra, at 444, 290 S.E.2d 652. See also Gregory v. Perdue, Inc., 47 N.C.App. 655, 267 S.E.2d 584 (1980). ["An offer to enter into a contract in the future must, to be binding, specify all of the essential and material terms and leave nothing to be agreed upon as a result of future negotiations." Id. at 657, 267 S.E.2d at 586, citing Smith v. House of Kenton Corp., 23 N.C.App. 439, 209 S.E.2d 397 (1974) ].

The Weaver court's analysis both of Boyce and its own case noted two common denominators: (1) The original agreements recited that they were preliminary agreements subject to final resolution by later agreements and (2) the agreements specified only the parties' intentions not their actual agreement.

In the present case, if the Resale Profits Agreement were the only writing or agreement in evidence, we might agree with the defendant's argument. The terms of the agreement itself suggest that it was an agreement to agree in the future: "We agree to enter into a contractual agreement concerning resale of the Bennett property...." However, while we might find, on the basis of the evidence presented, that the Resale Profits Agreement, taken alone, is an agreement to agree and not an enforceable contract, we do not believe this to be determinative. Instead, we believe the controlling contract to be the Offer to Purchase and Contract. We hold that the Resale Profits Agreement, being contemporaneously signed with the Offer to Purchase, became incorporated into the same to comprise the overall contract. We overrule the defendant's first assignment of error.

Contemporaneously signed writings may be incorporated together to divine the meaning and purpose of the contractual whole. Yates v. Brown, 275 N.C. 634, 170 S.E.2d 477 (1969). Moreover, the parties' intentions which are controlling in contract construction, Cordaro v. Singleton, 31 N.C.App. 476, 229 S.E.2d 707 (1976), may be construed from the terms of the writings and the parties' conduct. Heater v. Heater, 53 N.C.App. 101, 280 S.E.2d 19 (1981). The defendant, by his own testimony, admits that he and plaintiff had discussed the resale profits before 24 May 1983. In fact, defendant sent a letter to his attorney, dated May 23, 1983, which specified the terms of what became the resale agreement. Additionally, that the Resale Profits Agreement was signed in conjunction with the Offer to Purchase Agreement, indicates the parties' intention to include the Resale Profits Agreement in the overall contract. Yates, supra.

Furthermore, the parties' own conduct and words the following fall (1983) indicates even more clearly that both believed the Resale Profits and the Design Review Agreements to be in force and effect. The record shows that defendant sought plaintiff's approval several times that fall regarding potential buyers and a design scheme created by Martin. Defendant also suggested that he and plaintiff form a limited partnership in which plaintiff would receive 10% of the profits while defendant would receive 40%. These terms matched proportionately those terms set out in the Resale Profit Agreement (80%/20%). Finally, plaintiff and defendant both testified that plaintiff told defendant she would not sign the Offer to Purchase Contract until both the Resale Profits Agreement and Design Review Agreements were signed.

The foregoing facts adduced at trial overwhelmingly support the conclusion that the parties intended the incorporation of the Resale Profits Agreement into this resulting contract.

The defendant argues that the merger clause contained in the preprinted Offer to Purchase Contract excludes, as a matter of law, all other agreements not expressed in the Offer to Purchase Contract. We disagree. The merger clauses were designed to effectuate the policies of the Parol Evidence Rule; i.e., barring the admission of prior and contemporaneous negotiations on terms inconsistent with the terms of the writing. North Carolina recognizes the validity of merger clauses and has consistently upheld them. Hotel Corporation v. Overman, 201 N.C. 337, 160 S.E. 289 (1931); Cable TV, Inc. v. Theatre Supply Co., 62 N.C.App. 61, 302 S.E.2d 458 (1983); Smith v. Central Soya of Athens, Inc., 604 F.Supp. 518 (E.D.N.C.1985). Merger clauses create a rebuttable presumption that the writing represents the final agreement between the parties. Generally, in order to effectively rebut the presumption, the claimant must establish the existence of fraud, bad faith, unconscionability, negligent omission or mistake in fact. Smith, supra at 526; White & Summers, Uniform Commercial Code, § 2-12 (2d ed. 1980).

Nevertheless, this Court has recognized an exception to this general rule. Where giving effect to the merger clause would frustrate and distort the parties' true intentions and understanding regarding the contract, the clause will not be enforced: "... to permit the standardized language in the printed forms, ... to nullify the clearly understood and expressed intent of the contracting parties would lead to a patently unjust and absurd result...." Loving Co v. Latham, 20 N.C.App. 318, 201 S.E.2d 516 (1974).

The distinction between the application of the two rules lies in the parties' overall intended purposes of the transaction in each case and whether admission of parol evidence will contradict or support those intentions as expressed in the writing(s). In the case of Neal v. Marrone, 239 N.C. 73, 79 S.E.2d 239 (1953) the court noted that defendant had failed to plead fraud or mistake and sought to introduce parol agreements which evidenced an entirely different contract from that written. Neal, supra. See also Cable TV, Inc., supra, when parol evidence which contradicted the express terms of a written contract as well as the parties' intentions was properly excluded. ("Tar River's problem is simply that they wanted more than they contracted for." 62 N.C.App. at 65, 302 S.E.2d at 460).

When, however, as in the present case, the parties' conduct indicates their intentions to include collateral agreements or writings despite the existence of the merger clause and the parol evidence is not markedly different, if at all, from the written contract, the parties' intentions should prevail. Loving Co., supra. Moreover, " 'separate contracts relating to the same subject matter and executed simultaneously by the same parties may be construed as one agreement,' " and this is true even where one contract states that there are no other agreements between the parties. 3 Corbin on Contracts § 578 (1960 & Supp. 1984) p. 648, citing Williams v. Mobil Oil Corp., 83 A.D.2d 434, 445 N.Y.S.2d 172 (1981). See also, Dynamics Corp. of America v. International Harvester Co., 429 F.Supp. 341 (S.D.N.Y.1977); Flemington National Bank & Trust Co. v. Domler Leasing Corp., 410 N.Y.S.2d 75, 65 A.D.2d 29 (1978); 17 Am.Jur.2d Contracts, § 224, p. 668 (1964).

That the three writings were signed together within the same transaction and that plaintiff told defendant she would not sign the Offer to Purchase Agreement without his signing the Resale Profits and Design Agreements supports the conclusion that all three were to be construed together, the merger clause notwithstanding.

Defendant further assigns as error the trial court's denial of defendant's Motion in Limine requesting exclusion of any prior or contemporaneous agreements as violative of the Parol Evidence Rule. Defendant specifically assails the admission of the Resale Profits and Design Review Agreements and other oral testimony regarding the parties' preliminary negotiations. We note at the outset that the two agreements are admissible as separately signed writings which should be construed together to comprise one contract. Yates v. Brown, supra; Dynamics Corp. of America, supra; 17 Am.Jur.2d Contracts, § 224, p. 668 (1964). Lastly, defendant contends that allowing plaintiff to testify that her agreement to enter into the Offer to Purchase constituted consideration for the Resale Profits Agreement violated the Parol Evidence Rule. Since we have already decided that the Resale Profits Agreement, construed to have been incorporated into the Offer to Purchase, constitutes an enforceable contract, we have decided this point against defendant.

As his second assignment of error, the defendant contends that the parties' conduct following 24 May 1983 which culminated in the 15 July 1983 closing constituted a novation as a matter of law. Again, the facts and law of this case require a different conclusion.

The most noticeable feature of defendant's argument is defendant's own substitution of the word "novation" for the trial court's term "substitution" as the issue was put to the jury. Defendant's...