Grimes v. Grimes

267 S.E.2d 372 (1980) 47 N.C. App. 353

William P. GRIMES
v.
Mary Raker GRIMES.

No. 7922SC736.

Court of Appeals of North Carolina.

June 17, 1980.

Wilson, Biesecker, Tripp & Wall by Joe E. Biesecker, Lexington, for plaintiff-appellant.

Grubb, Penry & Penry by Phyllis S. Penry, Lexington, for defendant-appellee.

MORRIS, Chief Judge.

Upon making findings of fact with respect to the circumstances surrounding the execution of the note in question and plaintiff's and defendant's use of the loan proceeds therefrom, the trial judge made the following conclusions of law:

1. That the plaintiff is presumed to be legally obligated for the support of his wife and family.

2. That if a wife receives and uses her husband's money there is a presumption of gift in the absence of the contract to repay.

3. There is no evidence to rebut the above stated presumption and there exist no express contract between the parties for repayment.

4. There is no evidence that the plaintiff [sic] received any benefit other than that accorded to her by her marital status from the loan in question.

We certainly agree with the court and defendant that, nothing else appearing, the law presumes a gift where there is a transfer of realty or personalty from husband to wife. In Underwood v. Otwell, 269 N.C. 571, 153 S.E.2d 40 (1967), the Court stated the following:

It is established law in this State that when a husband purchases land and causes it to be conveyed to his wife, the law presumes that the land is a gift to the wife, and no resulting trust arises. [Citations omitted.] Similarly, a gift is presumed when the husband pays for personalty and procures title either in the wife's name or in their joint names.

269 N.C. at 574, 153 S.E.2d at 43. It is also true that at common law, a note evidencing a debt executed jointly by husband and wife rendered the husband liable on the note, but not the wife. See Taft v. Covington, 199 N.C. 51, 153 S.E. 597 (1930). See generally 41 C.J.S. Husband and Wife § 185b (1944). However, this rule no longer obtains. G.S. 52-2. Now where the wife executes a promissory note as a co-maker, she is primarily liable thereunder. Taft v. Covington, supra; Union National Bank v. Jonas, 212 N.C. 394, 193 S.E. 265 (1937); Davis v. Cockman, 211 N.C. 630, 191 S.E. 322 (1937). See Wilson v. Vreeland, 176 N.C. 504, 97 S.E. 427 (1918). This result follows from the rule that, nothing else appearing, a person signing his or her name at the bottom of the face of a promissory note is a maker thereof, and is primarily liable thereon. Union National Bank v. Jonas, supra. See O'Grady v. First Union National Bank, 296 N.C. 212, 250 S.E.2d 587 (1978).

With respect to the applicability of the Uniform Commercial Code, as adopted in North Carolina, on the negotiable note in question, it is clear that the liability of a person signing a negotiable instrument is determined by the capacity in which one executes the instrument. Under G.S. 25-3-413(1), the maker "engages that he will pay the instrument according to its tenor at the time of his engagement . . . ." A maker's liability is unconditional and absolute. When two or more persons execute a note as makers, they are jointly and severally liable, unless the language of the note clearly indicates the contrary. G.S. 25-3-118(e); O'Grady v. First Union National Bank, supra. Because of the joint and several nature of a maker's obligation under a note, when one co-maker pays the instrument he is entitled to contribution from other co-makers. Raleigh Banking and Trust Co. v. York, 199 N.C. 624, 155 S.E. 263 (1930); Wachovia Bank and Trust Co. v. Black, 198 N.C. 219, 151 S.E. 269 (1930); Lancaster v. Stanfield, 191 N.C. 340, 132 S.E. 21 (1926). See Wilson v. Vreeland, supra.

We are of the opinion that a co-maker's right to contribution is unaffected by the marital relationship of the parties to a note. This case is different from those situations to which a presumption of gift attaches, because in those cases the wife had been given merely a transfer of value from the husband. Here, however, the wife has personally obligated herself under the note. Defendant, as a co-maker, has an absolute and unconditional obligation under the note. The fact that the proceeds from the loan were used during the marriage is of no moment. At any rate, plaintiff and defendant were divorced at the time plaintiff paid the balance due under the note. No presumption of gift arises, therefore, from plaintiff's retiring the debt. Accordingly, we overrule the trial court's conclusions in this regard.

The capacity in which defendant signed the note is a question which must be answered. As between the parties jointly and severally liable under a note, the law is settled that the true relationship existing between the parties may be revealed to alter the otherwise absolute obligation of the signers. Thus, evidence has been held admissible to show that a surety on the face of a note and an accommodation endorser are actually co-sureties by virtue of a separate agreement among themselves. Lancaster v. Stanfield, supra. We believe justice would be best served if this case were remanded to the trial court for a determination of the capacity in which defendant signed the note, and so hold.

Since the trial judge will be charged with the duty, on remand, to make new findings of fact and conclusions of law based on the evidence adduced on further hearing, we need not discuss defendant's first two assignments of error dealing with certain of the court's findings.

Reversed and remanded.

VAUGHN and ARNOLD, JJ., concur.