Southern Nat. Bank of North Carolina v. Pocock

223 S.E.2d 518 (1976) 29 N.C. App. 52

SOUTHERN NATIONAL BANK OF NORTH CAROLINA
v.
Ian I. POCOCK and wife, Laura E. Pocock.

No. 7510SC732.

Court of Appeals of North Carolina.

April 7, 1976. Certiorari Denied June 1, 1976.

Thomas Dewey Mooring, Jr., LaGrange, for plaintiff-appellee.

Vaughan S. Winborne, Raleigh, for defendants-appellants.

Certiorari Denied by Supreme Court June 1, 1976.

PARKER, Judge.

At issue between the parties is whether defendants are personally liable on the contract of guaranty. Insofar as pertinent to the question presented by this appeal, G.S. 25-3-403(2)(b) provides:

"G.S. 25-3-403. Signature of authorized representative.

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(2) An authorized representative who signs his own name to an instrument

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(b) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person represented but does show that the representative signed in a representative capacity."

Here, there was evidence to show that defendant Ian I. Pocock was the duly elected President and defendant Laura E. Pocock was the duly elected Secretary-Treasurer of S&S Cleaners, Inc. As such corporate officers, each was a "representative" of the corporation as the word "representative" is used in the above statute. G.S. 25-1-201(35). No question has been here raised as to their authority to act as representatives of the corporation in connection with the loan made to it by the plaintiff Bank.

Insofar as the fact of the Security Agreement, which consisted of the note and chattel mortgage, is concerned, there can be no question that the obligation thereby incurred is solely that of the corporation, since the corporation is expressly named therein as the "Borrower-Debtor(s)" and the signatures of the two defendants show that they signed in a representative capacity as corporate officers. The present case, however, is not brought to enforce any obligation contained in the Security Agreement, but is brought solely to enforce the "Guaranty of third persons" which was printed on the reverse side and which defendants also signed. The obligation created by that instrument is "separate and independent of the obligation of the principal debtor." Investment Properties v. Norburn, 281 N.C. 191, 195, 188 S.E.2d 342, 345 (1972). That instrument does not name any person represented but does show that defendants signed in a representative capacity. Thus, under G.S. 25-3-403(2)(b) defendants are personally obligated on the guaranty agreement "except as otherwise established between the immediate parties." Therefore, the determinative issue between the parties in this case is narrowed to whether it was here "otherwise established." Defendants' assignments of error should be considered in the light of the foregoing analysis as to the effect which G.S. 25-3-403(2)(b) has upon the rights of the parties under the facts of this case.

Defendants first assign error to the denial of their motion to dismiss made under Rule 12(b)(6) and to the denial of their motion for summary judgment. These motions were properly denied. Plaintiff's complaint was clearly sufficient to state a claim upon which relief can be granted, and the affidavits filed by the parties and considered by the court in connection with the motion for summary judgment clearly fall short of establishing that there was no genuine issue as to any material fact. Quite to the contrary, comparison of the affidavits filed by the defendants with the affidavit of an official of the plaintiff Bank clearly demonstrates that there was a very lively issue between the parties as to the material facts bearing upon the determinative issue in this case.

Defendants' motion for a directed verdict made at the close of the evidence was also properly denied. Plaintiff's evidence showed the making of the loan by plaintiff Bank to the principal debtor, S & S Cleaners, Inc., the execution of the written "Guaranty of Third Persons" by defendants, plaintiff's extension of credit in reliance on that guaranty, default by the principal debtor, notice of default given to defendants, refusal to pay by defendants, and damage to plaintiff. Although there was a conflict in the evidence bearing upon the determinative issue in this case as to whether it was, or was not, "established between the immediate parties" that defendants were not to be personally obligated on the "Guaranty of Third Persons" which they signed, when we view the evidence in the light most favorable to plaintiff, as we must when passing upon the trial court's ruling on defendants' motion for directed verdict, Kelly v. Harvester Co., 278 N.C. 153, 179 S.E.2d 396 (1971), we find the evidence amply sufficient to take the case to the jury. Plaintiff's evidence was to the effect that both prior to and at the time the loan was made, the Bank's officials explained to defendants in detail what would be required of them in the way of a personal guaranty, and that, far from it being established that defendants were not to be personally obligated, the Bank was relying on their personal obligation and would not have made the loan without it. Defendants' testimony to the contrary was for the jury to evaluate.

We also find no merit in the contention made by the defendant, Laura E. Pocock, that directed verdict should have been allowed as to her on the grounds that the evidence shows she received no consideration, directly or indirectly, for signing the guaranty agreement. "In a guaranty contract, a consideration moving directly to the guarantor is not essential. The promise is enforceable if a benefit to the principal debtor is shown or if detriment or inconvenience to the promisee is disclosed." Investment Properties v. Norburn, supra, 281 N.C. p. 196, 188 S.E.2d p. 345.

Defendants assign error to rulings of the court excluding their testimony as to their intention at the time of signing the guaranty not to be bound in their individual capacities. Under G.S. 25-3-403(2)(b), a party's undisclosed intention not to be personally obligated, by itself, is irrelevant. The statute makes the signing party personally obligated "except as otherwise established between the immediate parties," and it takes more than an intention of one party undisclosed to the other to establish the requisite understanding between the parties. We find no error in the court's rulings on the evidence.

Defendants assign error to the following portion of the court's charge to the jury:

"Our law provides that where the person is not named, or in this case a corporation, but does show that a representative signed in a representative capacity, that is where words such as President or Secretary-Treasurer are placed after names and does not show before that, or in connection with it, the name of the corporation, that a person who signs it in such a manner becomes personally obligated for the instrument or obligation for the instrument which he or she signed, unless that person shows by the evidence, it was not intended as a personal obligation but was intended as an obligation of the person from whom he held to be in a representative capacity, such as the corporation; in other words, the corporation.

So the plaintiff having shown, the defendants having admitted, that they signed the purported guaranty on the instrument and placed after their names the letters abbreviating President and Secretary and Treasurer, they would be personally obligated upon such guaranty agreement, unless they show, or each of them shows, that it was intended and agreed that they signed as representatives of the corporation and not individually, in the signing of such an agreement."

Although perhaps somewhat awkwardly expressed, we find no error prejudicial to defendants in the court's instructions to the jury. Defendants' contention that the quoted portion of the charge incorrectly shifted the burden of proof to them cannot be sustained. The statute, G.S. 25-3-403(2)(b), imposes personal obligation on the party signing under the circumstances therein enumerated "except as otherwise established between the immediate parties." Therefore, unless the signing party can establish otherwise as between himself and the other immediate parties to the instrument, the law makes him personally obligated. The clear intent of the statute is that the signing party has the burden to otherwise establish, else he incurs the personal obligation which the statute imposes.

Defendants assign error to the denial of their motion to set aside the jury's verdict as to all issues. The record discloses that when the jury first returned its verdict answering the four issues originally submitted to it, the court noted that the jury had failed to follow its instructions in answering the third and fourth issues. Accordingly, the court refused to accept the jury's answers as to those issues. Defendant's counsel then moved to set aside the answers to all issues, contending "that this is a compromise verdict." The Court, finding that "there has been no indication that this is a compromise verdict by the jury," denied the motion. Thereafter, defendants' counsel, without waiving his objection to the denial of his motion to resubmit all issues, stipulated that a single issue, the fifth issue, be submitted, and this was done.

We find no error in the denial of defendants' motion to resubmit all issues. "Before a verdict is complete it must be accepted by the court, but it is the duty of the presiding judge, before accepting a verdict, to scrutinize its form and substance to prevent insufficient or inconsistent findings from becoming a record of the court. Therefore, where the findings are indefinite or inconsistent, the presiding judge may give additional instructions and direct the jury to retire again and bring in a proper verdict, but he may not tell them what their verdict shall be." Edwards v. Motor Co., 235 N.C. 269, 272, 69 S.E.2d 550, 552 (1952). Moreover, the trial judge "may vacate the answer to a particular issue when to do so does not affect or alter the import of the answers to the other issues," Lee v. Rhodes, 230 N.C. 190, 192, 52 S.E.2d 674, 675 (1949). In the present case, when the trial judge noted the inconsistency in the jury's answers to the third and fourth issues, which related only to the amount of damages, it was within the court's sound discretion either to resubmit all issues or to resubmit only on issues as to damages. There was no abuse of the Court's discretion in refusing to resubmit all issues.

We have carefully examined all of defendants' remaining assignments of error, and find no error such as would warrant granting another trial.

No Error.

HEDRICK and ARNOLD, JJ., concur.