Oxford Plastics v. Goodson , 74 N.C. App. 256 ( 1985 )

328 S.E.2d 7 (1985)

In the Matter of OXFORD PLASTICS, A DIVISION OF PLASTICS ENGINEERING CORP.
v.
Marion GOODSON, Jr., Andrew Whitley and McThadeus Carpenter d/b/a Whitley Telephone Devices.

No. 849SC748.

Court of Appeals of North Carolina.

April 16, 1985.

Watkins, Finch & Hopper by William L. Hopper, for plaintiff.

Edmundson & Catherwood by John W. Watson, Jr., for defendants.

WELLS, Judge.

Defendants bring forth two assignments of error in which they contend that the trial court erred in denying their motion for relief from the 18 January 1984 judgment by (1) finding that defendants had not shown excusable neglect and (2) finding that defendants had failed to produce evidence of a meritorious defense. For the reasons stated below we reverse the trial court's order.

Relief from a judgment or order may be granted by the trial court "[o]n motion and upon such terms as are just" when there has been a

(1) Mistake, inadvertence, surprise, or excusable neglect;

. . . . .

(6) Any other reason justifying relief from the operation of the judgment.

N.C.Gen.Stat. § 1A-1, Rule 60(b) of the Rules of Civil Procedure. "If a movant is uncertain whether to proceed under clause (1) or (6) of Rule 60(b), he need not specify [which subsection] ... if his motion is timely and the reason justifies relief.... Under either clause the movant must show that he has a meritorious defense," Sides v. Reid, 35 N.C.App. 235, 241 S.E.2d 110 (1978) (citations omitted); see generally 7 Moore's Federal Practice § 60.27(1) (2d ed. 1983); W. Shuford, N.C.Civ.Prac. & Proc. § 60-11 (2nd ed. 1981 & Supp.1984), as it would be a waste of judicial economy to vacate a judgment or order when the movant could not prevail on the merits of the civil action. Doxol Gas v. Barefoot, 10 N.C.App. 703, 179 S.E.2d 890 (1971). The motion for relief from a judgment or order made pursuant to Rule 60(b) is within the sound discretion of the trial court, e.g., Harris v. Harris, 307 N.C. 684, 300 S.E.2d 369 (1983), and the trial court's decision will not be disturbed absent an abuse of that discretion, e.g., Harrington v. Harrington, 38 N.C.App. 610, 248 S.E.2d 460 (1978). The court's findings of fact are conclusive on appeal when there is any competent evidence supporting the findings.

When relief is sought under Rule 60(b)(1), the trial court first determines if there has been a mistake, inadvertence, surprise, or excusable neglect. Whether the facts found constitute excusable neglect or not is a matter of law and reviewable on appeal, Doxol Gas v. Barefoot, supra; Mason v. Mason, 22 N.C.App. 494, 206 S.E.2d 764 (1974), when the trial court's findings are made under a misapprehension of the law, and when the findings are insufficient to support the trial court's conclusion of law. Dishman v. Dishman, 37 N.C.App. 543, 246 S.E.2d 819 (1978); Mason v. Mason, supra. If the motion does not allege factual allegations corresponding to the specific situations contemplated in clauses (1) through (5), subsection (6) serves as a "grand reservoir of equitable power" by which a court may grant relief from an order or judgment. Equipment Co. v. Albertson, 35 N.C.App. 144, 240 S.E.2d 499 (1978). The expansive test by which relief can be given under subsection (6) is whether "(1) extraordinary circumstances exist and (2) there is a showing that justice demands it." Baylor v. Brown, 46 N.C.App. 664, 266 S.E.2d 9 (1980). Trial courts are to consider:

[T]he general desirability that a final judgment not be lightly disturbed, ... where relief is sought from a judgment of dismissal or default, the relative interest of deciding cases on the merits and the interest in orderly procedure, ... the opportunity the movant had to present his claim or defense, and ... any intervening equities.

Id., (quoting Equipment Co. v. Albertson, supra).

The trial court, after determining if movants have shown grounds for relief under subsection (1) or (6), next considers whether the movant has demonstrated a meritorious defense. The court:

[S]hould determine whether the movant has, in good faith, presented by his allegations, prima facie, a valid defense.... ``Where a party, in good faith, shows facts which raise an issue sufficient to defeat his adversary, if it be found in his favor, it is for the jury to try the issue and not for the judge, who merely finds whether on their face the facts show a good defense in law; otherwise, the defendant, though he establish ever so clear a case of excusable neglect entitling him to have the judgment set aside, would be deprived of the right of trial by the jury of the issue thus raised.' ...

Bank v. Finance Co., 25 N.C.App. 211, 212 S.E.2d 552 (1975) (citations omitted) (emphasis in original); see also Wynnewood Corp. v. Soderquist, 27 N.C.App. 611, 219 S.E.2d 787 (1975). While Bank involved a motion for relief under Rule 60(b)(1), the principles established for determining the existence of a meritorious defense would also be applicable to subsection (6).

In the case before us, the court made, the following findings of fact:

1. That the defendant, Marion Goodson, Jr., who was formerly counsel of record for the parties in this matter, and who was a party defendant hereto, received notice of the calendaring of this action for the January 16, 1984 term of Granville County Civil Superior Court.

2. That the defendant, Marion Goodson, Jr., was a general partner along with McThadeus Carpenter and Andrew Whitley in the partnership known as Whitley Telephone Devices and that notice to one partner of the calendaring of this matter for trial during the January 16, 1984 term of Granville County Civil Superior Court, constitutes notice to all of the partners.

The court's finding of fact that Marion Goodson "received" notice of the court calendar is not supported by any evidence in the record, which clearly establishes that Goodson never received the trial calendar mailed to him in accordance with Rule 2(b) of the General Rules of Practice of the Superior and District Courts. We hold that under these circumstances, a reasonable application of the provisions of Rule 60(b)(6) require that defendants be excused from attendance at trial, and, if defendants have shown a meritorious defense, require reversal of the trial court's judgment.

The trial court found and concluded that movants' allegations did not present a meritorious defense to plaintiff's civil action. Movants contend that their pleadings and affidavits present a meritorious defense because Goodson's actions were not authorized by the partnership and they were unaware of Goodson's actions. The record before us reveals that the partnership entered into a contract with plaintiff on 2 March 1981 in which the latter agreed to design and produce production molds and progressive dyes for the partnership, who agreed to pay one-third of the purchase price with the contract, one-third upon delivery, and one-third on acceptance. Subsequently, defendants' requested design modifications and plaintiff required further payment. After Goodson's check for $5,000 was returned for non-sufficient funds, Whitley met with David Ratcliff, plaintiff's general manager, on 13 April 1982. As a result, Ratcliff forwarded two documents to Whitley proposing certain modifications in the original contract; price adjustments, cessation of production until the adjusted balance of $17,016 was paid, and delivery of 100 sample units within sixty days after payment of the adjusted contract price. Whitley never signed the documents and, in his affidavit, he stated that he "did not execute and return the letter to signify my agreement."

On 8 September 1982, Goodson entered into a written agreement with plaintiff in which plaintiff agreed to have criminal charges for the check returned for non-sufficient funds dismissed when Goodson's second check for $5,000 had cleared the bank. Goodson agreed to hold plaintiff harmless for having instituted the criminal prosecution, and confirmed that plaintiff would not be responsible for proceeding with production of the telephone devices until the adjusted balance of $17,016 had been paid in accordance with Ratcliff's letters to Whitley. Goodson signed the contract in his individual name, not in the partnership name.

N.C.Gen.Stat. § 59-39(a) provides:

(a) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.

Brewer v. Elks, 260 N.C. 470, 133 S.E.2d 159 (1963) makes it clear that in order for a written instrument to be binding on a partnership, the instrument must be executed in the partnership name and that where the instrument was not signed in the partnership name, as was the case here, the burden would be on plaintiff to show that defendants' Whitley and Carpenter authorized Goodson to modify the original agreement. See also Bank v. Wallens, 31 N.C.App. 721, 230 S.E.2d 690 (1976). We hold that defendants presented a prima facie defense.

For the reasons stated, the judgment of the trial court must be vacated and the cause remanded for trial on the merits.

Vacated and remanded.

MARTIN, J., concurs.

HEDRICK, C.J., concurs in the result.