Opinion
No. COA11–567.
2012-04-3
CROP PRODUCTION SERVICES, INC., Plaintiff, v. Jarvis McDONALD and Faye McDonald, Defendants.
Daughtry Woodard Lawrence & Starling, by Luther D. Starling, Jr., for plaintiff-appellee. David F. Mills, P.A., by David F. Mills and Sara E. Russell, for defendant-appellant Faye McDonald.
Appeal by defendant from order entered 29 November 2010 by Judge Ronald L. Stephens in Franklin County Superior Court. Heard in the Court of Appeals 26 October 2011. Daughtry Woodard Lawrence & Starling, by Luther D. Starling, Jr., for plaintiff-appellee. David F. Mills, P.A., by David F. Mills and Sara E. Russell, for defendant-appellant Faye McDonald.
GEER, Judge.
Defendant Faye McDonald appeals from an order granting summary judgment to plaintiff Crop Production Services, Inc. (“CPS”) and concluding that she is jointly and severally liable, with her husband, for indebtedness for farm supplies purchased from CPS. Although Ms. McDonald contends that genuine issues of material fact exist regarding whether a second contract was substituted for the one upon which CPS sued, she failed to present competent evidence supporting her contentions. We, therefore, affirm.
Defendant Jarvis McDonald, Ms. McDonald's husband, does not appeal from the order. He concedes that he is liable for the indebtedness to CPS.
Facts
In 2007, the McDonalds applied to open an account with CPS. CPS required that they jointly fill out a “Customer Profile” that included personal and business information, as well as credit references. Depending on the information provided, CPS could deny a credit account, request additional information or references, withhold credit, or supply credit. On the Customer Profile, it explicitly indicated that a signature acknowledged acceptance of the Commercial Credit Agreement/Terms and Conditions. Ms. McDonald signed this Customer Profile along with her husband. The McDonalds were ultimately given a $450,000.00 credit limit.
In 2007 and 2008, CPS sold the McDonalds farming supplies on credit. According to Ms. McDonald, the account was paid off and had a zero balance by April 2009. Beginning in June 2009, however, CPS again sold the McDonalds farming supplies on credit, although Ms. McDonald contends that she did not incur that debt.
At some point in 2009, Mr. McDonald signed a document entitled “Agricultural Financing Application.” Ms. McDonald did not sign this document. The handwritten date next to Mr. McDonald's signature is 9 September 2009. Ms. McDonald, however, claims that the document was signed in April 2009, after the account balance was zero and before the charges at issue were incurred.
CPS filed suit against the McDonalds on 24 February 2010 to recover $470,507.48, the amount due on the account for the 2009 charges. The McDonalds filed an answer on 30 March 2010, admitting Mr. McDonald's indebtedness to CPS, but specifically denying that Ms. McDonald was liable to CPS. Ms. McDonald also asserted the affirmative defenses of payment and novation.
On 28 October 2010, CPS filed a motion for summary judgment, attaching the affidavit of Nancy Chase, the Area Credit Manager of CPS. According to Ms. Chase, the McDonalds had jointly applied to open an account and a revolving line of credit. The application also included a joint financial statement, and based on this information, the McDonalds were jointly extended credit. Ms. Chase stated that the account had never been paid in full, closed, or settled. That account was the one used for all goods, wares, and merchandise sold and delivered to the McDonalds until they ceased farming operations in late 2009.
Ms. Chase's affidavit further indicated that the form signed by Mr. McDonald in 2009 was to update information on the revolving credit account held by the McDonalds. Ms. Chase stated that at no time did the McDonalds discuss with Ms. Chase the possible release of Ms. McDonald from the account, and Ms. Chase had never considered that possibility. Further, Ms. Chase asserted that the McDonalds did not ask CPS to accept and Ms. Chase did not intend to accept a new contract in substitution or satisfaction of the original credit application.
In response to CPS' summary judgment motion, Ms. McDonald filed an affidavit claiming that she had a limited role in the operation of her husband's farm. With respect to CPS, Ms. McDonald stated:
9. In late 2006 or early 2007, I was asked to sign the credit application attached to the Complaint and referred to as Exhibit B to the Affidavit of Nancy Chase. Thereafter, Crop Production Service (CPS) extended credit to my husband in 2007. The balance was paid in full in April 2008. CPS extended credit again in 2008, and the balance was paid in full in April 2009.
10. At or about this time, CPS required my husband to sign a new contract and credit application, which is attached hereto as Exhibit A and incorporated by reference. CPS did not require me to sign this application and I did not sign this application.
11. The balance owing on the account was incurred after the new application and contract was signed by my husband, without my signature.
The trial court granted CPS' motion for summary judgment in an order entered 29 November 2010. Ms. McDonald timely appealed to this Court.
Discussion
Summary judgment should be granted “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 a judgment as a matter of law.” N.C.R. Civ. P. 56(c). The party moving for summary judgment has the burden of establishing the lack of any triable issues. Collingwood v. Gen. Elec. Real Estate Equities, Inc., 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989).
Once the moving party meets its burden, then the non-moving party must “produce a forecast of evidence demonstrating that [it] will be able to make out at least a prima facie case at trial.” Id. In opposing a motion for summary judgment, the non-moving party “may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.” N.C.R. Civ. P. 56(e). This Court reviews de novo a trial court's decision to grant summary judgment. Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470, 597 S.E.2d 674, 693 (2004).
In arguing that the evidence gives rise to genuine issues of material fact precluding summary judgment, Ms. McDonald relies primarily on the parties' dispute over the date that Mr. McDonald signed the 2009 Agricultural Financing Application. Ms. McDonald contends that the application was signed in April 2009, when the original account had a zero balance. She argues that the 2009 application created a new contract to which she was not a party. According to Ms. McDonald, “[i]f the finder of fact determines that the second Customer Profile was signed in April 2009 and that it was a contract, then a new contract was formed between Jarvis and the Plaintiff–Appellee, to which Appellant Faye was not a party.” Ms. McDonald argues that the balance due was incurred pursuant to the new contract and, therefore, she is not liable to CPS.
Ms. McDonald's theory hinges on the credit application having been signed in April 2009. The credit application itself bears a date of 9 September 2009. On appeal, Ms. McDonald points solely to her own affidavit as evidence that the new credit application was in fact signed in April. Indeed, our review of the record indicates that there is no other evidence from any other source supporting the April 2009 date—neither Ms. McDonald nor her husband, in their depositions, stated when the new credit application was signed.
In reviewing the sufficiency of the affidavit to give rise to a genuine issue of material fact, we first note that “[i]t is well settled that Rule 56(e) affidavits must be based on the affiant's personal knowledge.” Bird v. Bird, 363 N.C. 774, 777, 688 S.E.2d 420, 422 (2010). The facts set forth in the affidavit must be admissible in evidence, and the affidavit “shall show affirmatively that the affiant is competent to testify to the matters stated therein.” N.C.R. Civ. P. 56(e).
Here, Ms. McDonald asserts in her affidavit that “[a]t or about” April 2009, CPS required her husband “to sign a new contract and credit application....” She does not explain in the affidavit how she happens to have personal knowledge of when her husband signed the application. If Ms. McDonald's knowledge of the date came from her husband telling her, then the information reported in the affidavit would constitute hearsay that may not be considered on summary judgment. See Wein II, LLC v. Porter, 198 N.C.App. 472, 476, 683 S.E.2d 707, 711 (2009) (“ ‘Hearsay matters included in affidavits should not be considered by a trial court in entertaining a party's motion for summary judgment.’ “ (quoting Moore v. Coachmen Indus., Inc., 129 N.C.App. 389, 394, 499 S.E.2d 772, 776 (1998))).
While Ms. McDonald might have acquired personal knowledge by seeing her husband sign the document or through some other means, she has not met her burden of showing that she had the necessary personal knowledge. While the affidavit states that she “kept up the books and paid bills and payroll for [her husband] from the farm account at his direction,” it also states: “[E]xcept for the fact that I wrote the checks and paid the bills from the farm account, I was unaware of most farm credit requested and arranged by my husband .” The affidavit does not contain any information that explains how she happens to know when the application was signed. Indeed, her claimed lack of awareness regarding her husband's efforts to get farm credit suggests an absence of personal knowledge.
As a result, the affidavit does not show how she is competent to testify that the new credit application was signed in April. Without that showing, Ms. McDonald's affidavit is not sufficient to give rise to a genuine issue of material fact regarding the date that the credit application, which bears the 9 September 2009 date, was actually signed. See First Fed. Sav. & Loan Ass'n v. Branch Banking & Trust Co., 282 N.C. 44, 52, 191 S.E.2d 683, 688 (1972) (holding that affidavit did not comply with Rule 56(e) when it did “not show affirmatively that [the affiant] is competent to testify, of his own personal knowledge, concerning the matters” in affidavit). Because Ms. McDonald's defense requires that the application be signed prior to the date the disputed charges were incurred and she has failed to forecast evidence supporting that defense, the trial court properly entered summary judgment in CPS' favor.
Even assuming Ms. McDonald could present admissible evidence that the 2009 application was signed in April when the account balance was zero, she would still need to present evidence of novation in order to avoid liability for the balance in the account opened under the original customer profile and credit application. “A novation is the substitution of a new contract for an old one which is thereby extinguished.” Carolina Equip. & Parts Co. v. Anders, 265 N.C. 393, 400, 144 S.E.2d 252, 257 (1965).
An “essential requisite” of novation is “the agreement of all the parties to the new contract.” Tomberlin v. Long, 250 N.C. 640, 644, 109 S.E.2d 365, 367 (1959). See also Growers Exch., Inc. v. Hartman, 220 N.C. 30, 31–32, 16 S.E.2d 398, 398 (1941) (“[I]n order to constitute a novation the transaction must have been so intended by the parties.”); Allied Pers. of Raleigh, Inc. v. Alford, 25 N.C.App. 27, 31, 212 S.E.2d 46, 49 (1975) (holding that “the parties must have intended that the new agreement should be in substitution for and extinguishment of the old”). It is well established that “[t]he making of a second contract dealing with the subject matter of an earlier one does not necessarily abrogate the former contract.” Commercial Nat'l Bank v. Charlotte Supply Co., 226 N.C. 416, 426, 38 S.E.2d 503, 509 (1946). As our Supreme Court has explained, “[b]efore the new contract can be accepted as discharging the old, the fact that such was the intention of the parties must clearly appear.” Id., 38 S.E.2d at 510.
CPS presented evidence through the affidavit of Nancy Chase that it had no intent to enter into a new contract that would substitute for the original contract and release Ms. McDonald from the account. Ms. Chase explained in her affidavit that she sought the 2009 credit application only as part of her duty to review credit references on revolving accounts.
Once CPS presented this evidence of a lack of novation, the burden shifted to Ms. McDonald to come forward with evidence supporting her claim that there was a novation. Ms. McDonald did not, however, present any evidence that the new credit application was intended by all the parties to constitute a novation. Not only does Ms. McDonald point to no evidence countering CPS' evidence of their intent, but she also does not address the McDonalds' intent. Neither she nor her husband, during their depositions, indicated that they intended the new credit application to open a new account that would substitute for the prior account. Her affidavit does not supply the necessary evidence either. All the affidavit indicates is that Ms. McDonald simply considered the 2009 application “a new contract.”
If, however, “the parties do not say whether a new contract is being made, the courts will look to the words of the contracts, and the surrounding circumstances, if the words do not make it clear, to determine whether the second contract supersedes the first.” Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 526, 379 S.E .2d 824, 827 (1989). Nothing in the credit application indicates it was a novation or even a new contract. Further, the surrounding circumstances do not show that a new contract superseded the first, especially in light of the unchallenged evidence from CPS.
“The intention of the parties to effectuate a novation must be clear and definite, for novation is never to be presumed.” Kirby Bldg. Sys., Inc. v. McNiel, 327 N.C. 234, 243, 393 S.E.2d 827, 832 (1990). Given that Ms. McDonald presented no evidence of an intent by all the parties to effect a novation, we will not presume a novation occurred. Therefore, the trial court did not err in granting CPS' motion for summary judgment.
Affirmed. Judges STEELMAN and BEASLEY concur.
Report per Rule 30(e).