Summary
In Fagen’s, the defendant served as a guarantor concerning the plaintiff’s loan to a third-party borrower, an entity which the defendant did not own or operate.
Summary of this case from Smith Debnam Narron Drake Saintsing & Myers, LLP v. MuntjanOpinion
No. 9426SC244
Filed 3 January 1995
1. Guaranty § 13 (NCI4th) — guaranty agreement — terms prevail over general guaranty law The terms of the parties' guaranty agreement prevailed over general guaranty law so that defendant could be held liable as guarantor only if he was found to have benefited from the extension of credit to the borrower company or was found to be an officer of the borrower company.
Am Jur 2d, Guaranty §§ 26 et seq.
2. Guaranty § 13 (NCI4th) — no personal benefit from extension of credit — defendant not personally liable
Am Jur 2d, Guaranty §§ 26 et seq.
Appeal by defendant James Banks Myers, III, from judgment entered 2 November 1993 in Mecklenburg County Superior Court by Judge Robert M. Burroughs. Heard in the Court of Appeals 21 October 1994.
Reginald L. Yates for plaintiff-appellee.
John E. Hodge, Jr., and Burris MacMillan, by Robert N. Burris, for defendant-appellant James B. Myers, III.
Judge WYNN dissenting.
James B. Myers, III (Myers) appeals from a judgment for Fagen's of North Carolina, Inc. (plaintiff), decreeing him liable as a guarantor for a debt of Rocky River Real Estate Company (Rocky River).
Plaintiff sued defendants Myers, Rocky River and Kathy Peyton (Peyton) for $19,425.68, representing principal and interest due for nonpayment of building materials sold by plaintiff to Rocky River. The evidence reveals that the plaintiff accepted two credit applications from Rocky River, the first dated 10 July 1989 and the second dated 26 February 1990, both of which, the plaintiff alleges, are signed by Myers as "Guarantor and Pledgee." The credit applications provided in part:
In consideration of credit being extended by [plaintiff] to me/us/it, I . . . certify the truthfulness and veracity of the statement appearing on opposite side, and I . . . guarantee and bind [myself] to the faithful payment of all amounts purchased or now owing, by us or either of us, or any other person, firm or corporation for our benefit. If credit is extended to a corporation in which we, or I am an officer, or in which an interest exists I . . . will personally faithfully guarantee the payment of all credit extended to said corporation.
[Emphasis added.] Myers testified that, at the time of both credit applications, he was neither a partner nor an officer in Rocky River as he had transferred his interest in Rocky River to Peyton on 3 January 1989. The evidence also shows that at some time prior to 3 January 1989 the assets of Rocky River were transferred to LADM Group (LADM), a business entity partially owned by Myers.
Jewel Kee (Kee), plaintiff's credit manager, testified that, during a "mid-1990" meeting with Myers, he asked Kee to "hold the credit limit to $20,000 because he felt that was the maximum amount he could be personally liable for."
In a non-jury trial, the trial court found that Myers signed both guaranty agreements and that Myers "accepted and benefited from the extension of credit by the plaintiff." The trial court then concluded that Myers is jointly and severally, with Rocky River and Peyton, liable to plaintiff on theories of contract and quantum meruit.
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The issues on appeal are (I) whether the terms of this guaranty agreement prevail over general guaranty law; and if so, (II) whether the evidence supports the finding of the trial court that Myers benefited from the credit extended to the plaintiff.
I
[1] Myers argues that he can be held liable as guarantor only if he is found to have benefited from the extension of credit to Rocky River or is found to be an officer of Rocky River. The plaintiff contends that "it is not necessary that the promisor [sic] receive consideration or something of value himself" in order to hold Myers responsible as guarantor. We agree with Myers.
Although it is not generally necessary for a guarantor to receive a personal benefit to support a contract of guaranty, see Forsyth Co. Hosp. Auth., Inc. v. Sales, 82 N.C. App. 265, 267, 346 S.E.2d 212, 214 (discussing nature of contract of guaranty), disc. rev. denied, 318 N.C. 415, 349 S.E.2d 594 (1986); Howard v. Hamilton, 28 N.C. App. 670, 674, 222 S.E.2d 913, 917 (1976) (discussing the main purpose rule), specific contractual terms and intent, as opposed to general statements of law, control any agreement. See Poole Kent Corp. v. C.E. Thurston Sons, 286 N.C. 121, 129, 209 S.E.2d 450, 455 (1974).
In the present case, the plaintiff and Myers entered a contract for guaranty which only bound Myers if he received a personal benefit from the plaintiff's extension of credit or if he were an officer of the corporation receiving the credit. Thus we determine Myers' liability under the terms of this contract.
II
[2] Although there was no finding by the trial court as to Myers' status as an officer of Rocky River, the trial court did make a factual finding that Myers personally benefited from the credit extension. The question therefore is whether there is any competent evidence in the record to support this finding. Weston v. Carolina Medicorp, Inc., 102 N.C. App. 370, 372, 402 S.E.2d 653, 654, dismissal allowed, disc. rev. denied, 330 N.C. 123, 409 S.E.2d 611 (1991).
The plaintiff argues that Myers did benefit from the extension of credit to Rocky River because the "assets of Rocky River Real Estate were transferred to LADM Group, another business interest of Myers." We disagree. Myers had no interest in Rocky River at the time of the credit application. He had previously transferred his stock to Peyton. Furthermore, LADM's ownership of the assets once owned by Rocky River does not demonstrate that any benefit passed to LADM upon the extension of credit by the plaintiff to Rocky River. There is nothing in this record to suggest that Rocky River and LADM, at the time the credit was extended by plaintiff to Rocky River, were anything but separate and distinct business entities. Accordingly, the finding of the trial court that Myers benefited from the extension of credit to Rocky River is not supported by competent evidence. It thus follows that the trial court's conclusion that Myers' is jointly and severally liable as a guarantor for the principal amount of Rocky River's debt is without support.
The trial court's conclusion of law that Myers is bound to plaintiff on the alternative theory of quantum meruit is likewise without support, because that theory would also require some benefit passing to Myers upon the extension of credit to Rocky River. See Bales v. Evans, 94 N.C. App. 179, 181, 379 S.E.2d 698, 699 (1989) (to recover on the theory of quantum meruit, plaintiff must show that nongratuitous services were rendered to defendant). We also reject the plaintiff's contention that the judgment must be affirmed on the basis that the "mid-1990" conversation between Kee and Myers created an oral contract of guaranty. This theory is not supported by the trial court's findings of fact and the uncontroverted evidence in the record cannot support this Court entering the findings of fact required to sustain recovery on this basis. See Harris v. N.C. Farm Bureau Mut. Ins. Co., 91 N.C. App. 147, 150, 370 S.E.2d 700, 702 (1988) (appellate courts can draw inferences from undisputed facts when no findings are made by the trial court). Thus we do not further address that argument.
For these reasons the judgment of the trial court is
Reversed.
Judge JOHN concurs.
Judge WYNN dissents.