Howard v. Hamilton , 28 N.C. App. 670 ( 1976 )

222 S.E.2d 913 (1976) 28 N.C. App. 670

Richard HOWARD and A. C. Goines, et al., t/d/b/a Kings Drive Partnership Fund, a limited Partnership
v.
Jack T. HAMILTON.
Richard HOWARD and A. C. Goines, et al., t/d/b/a Kings Drive Partnership Fund, a limited Partnership
v.
Francis H. FAIRLEY et al.
Richard HOWARD and A. C. Goines, et al., t/d/b/a Kings Drive Partnership Fund, a limited Partnership
v.
Francis H. FAIRLEY et al.

No. 7526SC880.

Court of Appeals of North Carolina.

March 17, 1976.

James, Williams, McElroy & Diehl, P.A., by William K. Diehl, Jr., Henry James, Jr., and James H. Abrams, Jr., Charlotte, for plaintiffs-appellants.

Golding, Crews, Meekins, Gordon & Gray by John G. Golding, and Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston by Sydnor Thompson, Charlotte, for defendants-appellees in cases 69CVS2139 and 69CVS2040.

Wallace S. Osborne, Charlotte, for defendant-appellee Jack T. Hamilton in case 69CVS2138.

BRITT, Judge.

Did the trial court err in directing a verdict in favor of defendant Hamilton in the separate action against him (No. 69-CVS-2138)? We hold that it did not.

In our opinion, the oral promise allegedly made by defendant Hamilton was unenforceable under the Statute of Frauds, G.S. 22-1, which provides in pertinent part as follows: "No action shall be brought whereby . . . to charge any defendant upon a special promise to answer the debt, default or miscarriage of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party charged therewith or some other person thereunto by him lawfully authorized."

Plaintiffs' separate action against defendant Hamilton is based on their contention that defendant Hamilton orally guaranteed that if plaintiffs invested $300,000 in the Kings Drive Partnership Fund, he would personally repay said sum plus interest to the investors in the event Paway, Inc., defaulted in its obligation. Clearly, the alleged promise was one to answer the debt, default or miscarriage of another, thus would be barred by the statute unless shown to come within some recognized exception thereto.

Plaintiffs argue that this case falls within the "main purpose rule", a well known exception to the Statute of Frauds. This rule is restated in Burlington Industries, Inc. v. Foil, 284 N.C. 740, 748, 202 S.E.2d 591, 597 (1974), as follows:

"``. . . [W]henever the main purpose and the object of the promisor is not to answer for another, but to subserve some pecuniary or business purpose of his own, involving either a benefit to himself, or damage to the other contracting party, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing that liability.'" [Quoting Emerson v. Slater, 63 U. S. (22 How.) 28, 43, 16 L. Ed. 360, 365 (1859)]

After a careful review of the lengthy, and oftentimes conflicting, evidence presented by plaintiffs, we conclude that the evidence did not justify the submission of an issue to the jury under the main purpose rule.

We consider next the question whether the trial court erred in directing verdicts in favor of defendants in the other two actions (Nos. 69-CVS-2139 and 2140). We hold that it did not.

Defendants contend that the directed verdicts in their favor were proper for four reasons: (1) that the evidence failed to establish a breach of duty owed plaintiffs by defendants; (2) that any claims which plaintiffs might have had against defendants are barred by the statute of limitations; (3) that plaintiffs failed to show any damage proximately resulting from the alleged conduct of defendants; and (4) that plaintiffs are estopped to assert their alleged claims. Our holding that directed verdicts in favor of defendants was proper is based upon their plea of the statute of limitations and we do not reach any of the other three grounds argued.

One of the primary keys to these cases is the $587,000 indebtedness represented by the notes covering the funds used to purchase the lands. Plaintiffs contend that they were not aware of these notes in 1964 and did not agree, implicitly or explicitly, that their deed of trust would be junior to the deeds of trust securing these notes. Defendants contend that plaintiffs Goines and Howard had full knowledge of the notes in 1964 and that their knowledge was imputed to the other plaintiffs.

Since the statute of limitations was pleaded by defendants, the burden of showing that the action was instituted within the prescribed period was placed upon plaintiffs. Little v. Rose, 285 N.C. 724, 208 S.E.2d 666 (1974). It clearly appears that G.S. 1-52, the three years' statute of limitations, would apply to actions of this type. Although the actions were instituted on 1 April 1969, the record discloses that defendants executed a prospective waiver of the statute of limitations on 25 April 1968. Therefore, did plaintiffs discover, or should they have discovered, the alleged fraud or breach of contract prior to 25 April 1965?

The record firmly establishes that plaintiffs formed a limited partnership, that plaintiffs Goines and Howard are general partners and the other plaintiffs are limited partners. Not only was knowledge of the general partners imputed to the limited partners, but the knowledge of plaintiffs Goines or Howard was imputed to the other. Friend v. H. A. Friend & Company, 416 F.2d 526 (9th Cir. 1969), cert. denied, 397 U.S. 914, 90 S. Ct. 916, 25 L. Ed. 2d 94 (1970); Higgins v. Shenango Pottery Company, 279 F.2d 46 (3rd Cir. 1960), cert. denied, 364 U.S. 899, 81 S. Ct. 232, 5 L. Ed. 2d 193 (1960); Southern Chemical Company v. Bass, 175 N.C. 426, 95 S.E. 766 (1918).

It will be noted that soon after the meeting of investors on 14 May 1964, the limited partnership received additional contributions of $210,000, for a total of $300,000; and that on 15 June 1964, when defendant Monteith notified the Bank of Charlotte that Paway had executed a note and deed of trust to the partnership as required by the escrow agreement, the bank turned the $300,000 over to defendants as attorneys for Paway.

Clifford Hemingway, an officer of Paway who was called by plaintiffs as a witness, testified that before the partnership arrangements were consummated (May 1964) he told plaintiff Goines of Paway's financial situation with respect to the subject real estate and particularly the SMIT loans, and that these loans would be ahead of the partnership indebtedness.

By cross-examination of certain of plaintiffs' witnesses, defendants caused to be identified and entered into evidence a written document entitled "GUARANTEE OF NOTES" and providing as follows:

"FOR VALUE RECEIVED, we jointly and severally guarantee the payment of principal and interest of each and all of the following notes: (1) that certain note of Paul G. Kaneklides and Wife, Nadya A. Kanedlides, dated May 28, 1964 in the principal amount of $187,000.00 to Goodyear Mortgage Corporation; (2) that certain note of Park Road Professional Center, Inc., dated May 28, 1964 in the principal amount of $200,000.00 to Goodyear Mortgage Corporation; (3) that certain note of Kings Inn of Knoxville, Inc., dated May 28, 1964 in the principal amount of $200,000.00 to Goodyear Mortgage Corporation, together with Deed of Trust securing each of the same as and when each of the same shall become due, and of any extension thereof in whole or in part; accept all their respective provisions; authorize the maker, without notice to us to obtain an extension or extensions in whole or in part, and waive protest, demand and notice of protest; and also agree that in case of nonpayment of principal and interest when due, action may be brought by the holder of all or any of these notes against us, at the option of said holders, whether or not action has been commenced against the maker; and agree in any such action, the maker may or may not be joined with us, at the option of the holder. We do hereby specifically authorize and empower owner and holder of the notes hereby guaranteed to subordinate the lien of the respective Deeds of Trust securing these loans or release the security entirely to the lien of a construction loan to the First National Bank of Boston in the amount of $2,700,000.00 and/or Mutual Benefit Life Insurance Company and Florida Capital Corporation in like amount and we hereby agree that such action would not constitute a release of the Guarantors.

"WITNESS OUR HANDS AND SEALS, this the 28 day of May, 1964."

The document bears the signatures of Jack T. Hamilton, Clifford E. Hemingway, Steve A. Pappas, C. S. Goines, A. C. Goines, Joseph E. Moore and Richard Howard. It also purports to have been executed by Paway, Inc., through its president and secretary on 28 May 1964. The aggregate amount of the three notes is $587,000 and the notes secure the SMIT loans.

When questioned on cross-examination regarding the foregoing document, plaintiffs Goines and Howard were extremely evasive. Plaintiff Goines admitted signing the agreement and knowing what it was for, but denied that he signed it on "May 28". He acknowledged that in interrogatories answered prior to trial that he admitted signing the agreement on 28 May 1964 "or that approximate date". Plaintiff Howard admitted signing the agreement but insisted that the "date" was written in. The document reveals that "28 May" was written in but that "1964" was typed similar to the other provisions of the document.

We hold that plaintiffs failed to carry the burden of showing that the actions were instituted within three years after they discovered, or by the exercise of due care should have discovered, the alleged breach of contract and fraud.

For the reasons stated, the judgments appealed from are

Affirmed.

HEDRICK and MARTIN, JJ., concur.