Liles v. Myers , 38 N.C. App. 525 ( 1978 )

248 S.E.2d 385 (1978) 38 N.C. App. 525

Mildred J. LILES
v.
Alton R. MYERS t/a Myers Brothers t/a Brentwood Grill.

No. 7710DC1044.

Court of Appeals of North Carolina.

November 7, 1978.

Stephen T. Smith, Raleigh, for plaintiff-appellee.

T. Yates Dobson, Jr. and James W. Narron, Smithfield, for defendant-appellant.

MITCHELL, Judge.

The defendant assigns as error the trial court's entry of summary judgment for the plaintiff and contends that the plaintiff failed to show that she was entitled to judgment as a matter of law. We agree.

The plaintiff attached a photocopy of the note in question to her complaint and incorporated it therein by reference. The copy of the note reveals that it contains an unconditional promise by the defendant to pay a sum certain in currency and no other promise, order, obligation or power given by him. It is payable to the order of the plaintiff at a definite time and was signed by the defendant as maker. The promissory note is, therefore, a negotiable instrument. G.S. 25-3-104. As such, it may be freely transferred by supplying the necessary endorsement and delivering the instrument to the transferee. G.S. 25-3-202.

Prior to being entitled to a judgment against the defendant, the plaintiff was required to establish that she was holder of the note at the time of this suit. Schindler v. Ag Aero Distributors, Inc., 502 S.W.2d 581 (Tex.Civ.App.1973). See generally 12 Am.Jur.2d, Bills and Notes, § 1188, pp. 212-14, and cases referred to therein. This element might have been established by a showing that the plaintiff was in possession of the instrument and that it was issued or endorsed to her, to her order, to bearer or in blank. G.S. 25-1-201(20). It is essential that this element be established in order to protect the maker from any possibility of multiple judgments against him on the same note through no fault of his own. If such proof were not required, the plaintiff could negotiate the instrument to a third party who would become a holder in due course, bring a suit upon the note in her own name and obtain a judgment in her favor. Thereafter, the holder in due course could bring suit upon the note and possibly also obtain a judgment against the defendant. See, e. g., G.S. 25-3-602. Requiring proof that the plaintiff is the holder of the note at the time of her suit reduces the possibility of such an inequitable occurrence.

The requirement that this plaintiff prove her status as a holder of the note is distinguishable from a requirement that she allege that status in her pleadings. In Deloatch v. Vinson, 108 N.C. 147, 12 S.E. 895 (1891), followed in Thompson v. Johnson, 202 N.C. 817, 164 S.E. 357 (1932), the plaintiff sought to recover on a bond. The defendant answered the plaintiff's complaint and alleged "that he is informed and believes that the plaintiff is not the owner of the bond described in his complaint, and was not the owner thereof at the commencement of this action." This pleading by the defendant was held to be an "illogical pleading" which was "not allowed by The Code." The Court continued by stating that the "payee or endorsee of a note is the prima facie owner and holder. The allegation that he is so is unnecessary; and, if the defendant defends upon the ground that the plaintiff is not such owner, he should set up facts showing title in some one else." 108 N.C. at 148, 12 S.E. at 896. The Court additionally pointed out that defendants in such cases could protect themselves against unjustifiable claims by exercising the right to "demand strict proof."

The Court in Deloatch indicated that it relied upon citations taken from Bliss on Code Pleading in reaching its holding. We distinguish Deloatch from the case sub judice on the ground that Deloatch deals with the technical requirements of code pleading rather than with the proof required to establish entitlement to judgment as a matter of law within the meaning of G.S. 1A-1, Rule 56(c). Although the pleadings in a particular case may be sufficient to withstand a motion to dismiss for failure to state a claim upon which relief can be granted, they may, nonetheless, be insufficient to entitle the party as a matter of law to a judgment in his favor.

As evidence that a plaintiff is holder of a note is an essential element of a cause of action upon such note, the defendant was entitled to demand strict proof of this element. See Schindler v. Ag Aero Distributors, Inc., 502 S.W.2d 581 (Tex.Civ. App.1973) and 12 Am.Jur.2d, Bills and Notes, § 1188, pp. 212-14. By his answer denying the allegations of the complaint, the defendant demanded such strict proof. The incorporation by reference into the complaint of a copy of the note was not in itself sufficient evidence to establish for purposes of summary judgment that the plaintiff was the holder of the note. As the record on appeal fails to reveal that the note itself or any other competent evidence was introduced to show that the plaintiff was the holder of the note, she has failed to prove each essential element of her claim sufficiently to establish her entitlement to summary judgment.

Summary judgment is to be entered if, but 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 judgment as a matter of law." G.S. 1A-1, Rule 56(c). Taking every allegation in the plaintiff's complaint and affidavit as true, the plaintiff has failed to establish an essential element of her claim for relief. She has, therefore, failed to show that she is entitled as a matter of law to judgment. The granting of summary judgment in favor of the plaintiff was erroneous.

The defendant additionally contends that his answer and affidavit presented the trial court with a genuine issue of material fact with regard to the affirmative defense of failure of consideration, which made the entry of summary judgment for the plaintiff erroneous. Although we find this contention correct, our prior analysis and holding make its detailed consideration unnecessary.

For the reasons previously set forth, the judgment of the trial court must be and is

Reversed and the cause remanded.

MORRIS and ERWIN, JJ., concur.