Opinion
No. COA15-727
04-19-2016
PARKS BUILDING SUPPLY COMPANY, Plaintiff, v. BLACKWELL HOMES, INC.; NEW CENTURY BANK; and CHARLES DUSTIN BLACKWELL individual as guarantor, Defendants.
Vann Attorneys, PLLC, by James A. Beck II, for plaintiff-appellee. Roberson Haworth & Reese, P.L.L.C., by Alan B. Powell, Christopher C. Finan and Matthew A.L. Anderson, for defendant-appellant New Century Bank.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure. Harnett County, No. 12 CVS 2059 Appeal by defendant New Century Bank from judgment entered 3 March 2015 by Judge James M. Webb in Harnett County Superior Court. Heard in the Court of Appeals 15 December 2015. Vann Attorneys, PLLC, by James A. Beck II, for plaintiff-appellee. Roberson Haworth & Reese, P.L.L.C., by Alan B. Powell, Christopher C. Finan and Matthew A.L. Anderson, for defendant-appellant New Century Bank. GEER, Judge.
Defendant New Century Bank appeals from a judgment granting plaintiff Parks Building Supply Company's two materialman's liens priority over defendant's deeds of trust on the same real property, with the exception of defendant's first priority liens perfected pursuant to the doctrine of instantaneous seisin. Defendant primarily argues that the trial court erred in considering parol evidence to determine that Blackwell Homes, Inc. was the equitable owner of the subject real property at the time plaintiff furnished materials to it, even though the underlying contract for the sale of land referred to "Blackwell Homes" as the buyer and not "Blackwell Homes, Inc." We hold that the lack of a corporate identifier in the disputed contract created merely a latent ambiguity, resolvable by consideration of parol evidence. Therefore, the trial court could properly find, as it did, that the buyer of the land was in fact Blackwell Homes, Inc.
Facts
On 17 February 2012, two parties executed an agreement entitled "OFFER TO PURCHASE AND CONTRACT OF SALE" (the "Contract"). The Contract identified four tracts of land in Harnett County, North Carolina, including two tracts referred to as "Lot 14" and "Lot 17," as the subject of a sale between the seller, "Odell A. Smith Properties, LLC," and the buyer, identified as "Blackwell Homes." The signature block on the last page, however, identified the buyer as "By: Dustin Blackwell" and the notation "(SEAL)" appeared beside the signature.
Subsequently, on 27 February 2012, Blackwell Homes, Inc. executed and delivered two separate deeds of trust to defendant New Century Bank describing Lots 14 and 17. At this time, defendant advanced funds in the amount of $32,500.00 for each tract for the purchase of both tracts from Odell A. Smith Properties, LLC. Over the course of the loan, defendant advanced $143,286.00 and $149,141.00, respectively, to Blackwell Homes, Inc. pursuant to the loans secured by the Lot 14 and Lot 17 deeds of trust. On 9 March 2012, Blackwell Homes, Inc. took title to Lots 14 and 17 by general warranty deed from Odell A. Smith Properties, LLC and recorded the deeds and deeds of trust on 13 March 2012.
Plaintiff first furnished materials to Blackwell Homes, Inc. for use on Lot 17 on 27 February 2012 and for use on Lot 14 on 5 March 2012. Plaintiff subsequently filed claims of lien under Chapter 44A of the North Carolina General Statutes against Lots 14 and 17, each identifying Blackwell Homes, Inc. as the party with which plaintiff contracted for the purchase of materials related to improvements to each lot. On 16 October 2012, plaintiff filed a complaint to collect amounts owed by Blackwell Homes, Inc. and successfully obtained a judgment against Blackwell Homes, Inc. on 11 February 2013.
On 27 December 2012, prior to plaintiff's obtaining a judgment against Blackwell Homes, Inc., defendant New Century Bank filed a counterclaim and crossclaim against plaintiff and Blackwell Homes, Inc., respectively, requesting that the trial court quiet title with respect to Lots 14 and 17, given plaintiff's materialman's liens, and, in the alternative, declare that defendant's deeds of trust have priority over plaintiff's liens. Prior to trial, the parties stipulated that the sole issue to be decided by the court was the identity of the parties to the Contract: specifically whether the Contract executed under seal by Dustin Blackwell on 17 February 2012 was actually executed by Blackwell Homes, Inc., thereby rendering Blackwell Homes, Inc. an "owner" of the subject real property on the date plaintiff furnished materials, as defined by N.C. Gen. Stat. § 44A-7(6) (2015).
N.C. Gen. Stat. § 44A-7 was amended by 2012 N.C. Sess. Ch. 175, § 1. The amendment, effective 1 January 2013, is applicable to improvements to real property for which the first permit required to be obtained is obtained on or after 1 January 2013, or, if no permit is required, applies to improvements to real property commenced on or after 1 January 2013. The amendment added subdivisions (1), (2), (5), and (9) and re-designated the remaining subdivisions. Thus, N.C. Gen. Stat. § 44A-7(3) (2011) became N.C. Gen. Stat. § 44A-7(6) (2013). Because the amendment took effect after the events in this case occurred, the 2011 version of N.C. Gen. Stat. § 44A-7 was in effect during the relevant time period for this matter. Since the parties, however, cite to and quote from the subdivision designations of the later version of the statute, we have cited to the most current version of the statute in order to remain consistent with their arguments. --------
Defendant filed a motion in limine seeking the exclusion of all parol evidence offered for the purpose of identifying the buyer of the lots in the Contract. The trial court denied this motion and, after trial, entered judgment on 3 March 2015 concluding that Blackwell Homes, Inc. was a party to the Contract and, therefore, had an equitable interest in the lots at issue on the date that plaintiff furnished materials to Blackwell Homes, Inc. Accordingly, the trial court concluded that plaintiff held valid materialman's liens on Lots 14 and 17, thereby giving priority to plaintiff's liens with the exception of defendant's $32,500.00 first priority liens on each lot pursuant to the doctrine of instantaneous seisin. Defendant timely appealed to this Court.
Discussion
Defendant's overarching argument on appeal is that the trial court erred by relying upon parol evidence to conclude that Blackwell Homes, Inc. was the equitable owner of Lots 14 and 17 pursuant to a contract for the sale of land at the time plaintiff furnished materials to Blackwell Homes, Inc., thus giving plaintiff's materialman's lien priority over defendant's deeds of trust on the real property. In making this argument, defendant challenges both the trial court's denial of its motion in limine to exclude parol evidence and also the trial court's findings of fact and conclusions of law in the 3 March 2015 judgment.
When reviewing a decision to grant or deny a motion in limine, the "determination will not be reversed absent a showing of an abuse of the trial court's discretion." Warren v. Gen. Motors Corp, 142 N.C. App. 316, 319, 542 S.E.2d 317, 319 (2001). "It is an abuse of discretion for a trial court to base its decision on an error of law." Stark v. Ford Motor Co., 226 N.C. App. 80, 84, 739 S.E.2d 172, 176 (2013). However, when reviewing a judgment entered after a non-jury trial, " '[t]he standard of review on appeal . . . is whether there is competent evidence to support the trial court's findings of fact and whether the findings support the conclusions of law and ensuing judgment.' " Stikeleather Realty & Invs. Co. v. Broadway, ___ N.C. App. ___, ___, 772 S.E.2d 107, 113 (2015) (quoting Cartin v. Harrison, 151 N.C. App. 697, 699, 567 S.E.2d 174, 176 (2002)). "The trial court's conclusions of law are reviewed de novo[.]" Id. at ___, 772 S.E.2d at 113.
Plaintiff was entitled to file a valid materialman's lien upon real property if it "perform[ed] or furnish[ed] labor or . . . materials . . . pursuant to a contract, either express or implied, with the owner of real property for the making of an improvement thereon . . . ." N.C. Gen. Stat. § 44A-8 (2015) (emphasis added). The issue in this case is not whether plaintiff was entitled to a materialman's lien, but rather whether plaintiff's lien has priority over defendant's deeds of trust. That question depends upon when plaintiff became an "owner" within the meaning of N.C. Gen. Stat. § 44A-8.
An "[o]wner" for purposes of a materialman's lien is defined as one "who has an interest in the real property improved and for whom an improvement is made and who ordered the improvement to be made." N.C. Gen. Stat. § 44A-7(6). However, in Carolina Builders Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 231, 324 S.E.2d 626, 631 (1985), this Court held that the definition of "owner" also includes a party that has obtained an "equitable interest at the time materials were first furnished" pursuant to "an enforceable contract for the sale of land" and that obtains a "subsequent legal interest" in that land.
Thus, equitable ownership is established by an enforceable contract for the sale of land. An enforceable contract for the sale of land in North Carolina must, of course, satisfy the Statute of Frauds. See N.C. Gen. Stat. § 22-2 (2015). The Statute of Frauds requires that the contract be in writing and that the writing be " 'sufficiently definite to show the essential elements of a valid contract[,]' " including the " 'names of vendor and vendee, and a description of the lands to be conveyed, at least sufficiently definite to be aided by parol.' " Carr v. Good Shepherd Home, Inc., 269 N.C. 241, 243, 152 S.E.2d 85, 88 (1967) (quoting Smith v. Joyce, 214 N.C. 602, 604, 200 S.E. 431, 433 (1939)). In this case, the parties agree that if the Contract is enforceable as of its execution on 17 February 2012 and the buyer is Blackwell Homes, Inc., then Blackwell Homes, Inc. had equitable ownership of the real property at issue at the time plaintiff furnished materials for the improvement of the land, thereby giving plaintiff's liens priority over defendant's deeds of trust with the exception of defendant's $32,500.00 first priority liens on each lot pursuant to the doctrine of instantaneous seisin.
Defendant's argument on appeal rises and falls with its claim that the Contract's identification of the "buyer" of the property as "Blackwell Homes," without any corporate designation, means that Blackwell Homes, Inc. did not have an equitable interest in the property at the time plaintiff first furnished materials to Blackwell Homes, Inc. Specifically, defendant contends that the trial court erred in considering parol evidence when finding that the "buyer" for purposes of the Contract was "Blackwell Homes, Inc." We disagree.
The parol evidence rule " 'prohibits the consideration of evidence as to anything which happened prior to or simultaneously with the making of a contract which would vary the terms of the agreement.' " Thompson v. First Citizens Bank & Trust Co., 151 N.C. App. 704, 709, 567 S.E.2d 184, 188 (2002) (quoting Harrell v. First Union Nat. Bank, 76 N.C. App. 666, 667, 334 S.E.2d 109, 110 (1985), aff'd per curiam, 316 N.C. 191, 340 S.E.2d 111 (1986)). On the other hand, " '[w]henever the terms of a written contract or other instrument are susceptible of more than one interpretation, or an ambiguity arises . . . parol or extrinsic evidence may be introduced to show what was in the minds of the parties at the time of making the contract or executing the instrument[.]' " Root v. Allstate Ins. Co., 272 N.C. 580, 587, 158 S.E.2d 829, 835 (1968) (quoting 30 Am. Jur. 2d, Evidence § 1069 (1967)).
The important distinction is whether the ambiguity is patent or latent. "[W]here the language is patently ambiguous, parol evidence is not admissible to aid the description. To the contrary, where a latent ambiguity occurs, . . . parol evidence is admissible . . . ." Id. at 588, 158 S.E.2d at 835-36. In short, "[a] patent ambiguity raises a question of construction; a latent ambiguity raises a question of identity." Lane v. Coe, 262 N.C. 8, 13, 136 S.E.2d 269, 273 (1964).
While our courts' decisions have most frequently applied these principles in deciding whether parol evidence is admissible to identify the property described in a contract, in Troy & N.C. Gold Mining Co. v. Snow Lumber Co., 170 N.C. 273, 87 S.E. 40 (1915), our Supreme Court addressed the issue present in this case: whether parol evidence is admissible when a contract misidentifies a party. There, our Supreme Court noted: "As to the plaintiff being described by the wrong name in the deed, this is at most but a misnomer or latent ambiguity, which can be explained by parol evidence so as to fit the description to the person or corporation intended." Id. at 277, 87 S.E. at 42. The opinion continues, "A misnomer does not vitiate, provided the identity of the corporation with that intended to be named by the parties is apparent." Id. " 'A corporate name is essential, but the inadvertent or mistaken use of the name is ordinarily not material if the parties really intended the corporation by its proper name. If the name is expressed in the written instrument, so that the real name can be ascertained from it, this is sufficient; but if necessary, other evidence may be produced to establish what corporation was intended.' " Id. at 277-78, 87 S.E. at 43 (quoting Ryan v. Martin, 91 N.C. 464, 468 (1884)).
This Court quoted and relied upon this reasoning from Troy in Tomika Invs., Inc. v. Macedonia True Vine Pentecostal Holiness Church of God, Inc., 136 N.C. App. 493, 524 S.E.2d 591 (2000). In Tomika, the plaintiff's proper corporate name was "Tomika Investment Company," rather than "Tomika Investments, Inc.," as shown on the deed. Id. at 496, 524 S.E.2d at 593-94. Although the defendant contended that the error in identifying the grantee rendered the deed void, this Court, applying Troy, disagreed: "Here, there is only a latent ambiguity in the deed, and no evidence that defendant was prejudiced by the misstatement of Tomika's corporate name. Defendant knew it was dealing with a corporation named 'Tomika Investment' or 'Tomika Investments,' of which defendant Latimer was President." Id. at 497, 524 S.E.2d at 594. This Court, therefore, held that the trial court properly granted summary judgment to the plaintiff. Id.
Defendant, in this case, however, focuses on the language in Tomika quoted from Troy stating that " '[a] corporate name is essential' " and argues, based on this language, that some corporate identifier -- for example, "Co.," "Inc.," or "Ltd." -- is necessary to satisfy the Statute of Frauds and avoid the parol evidence rule. Id. at 496, 524 S.E.2d at 594 (quoting Troy, 170 N.C. at 277, 87 S.E. at 42). Troy, however, was quoting Ryan v. Martin, 91 N.C. 464, 468 (1884), and this language -- upon which defendant bases its appeal -- addressed an unrelated issue.
The defendant in Ryan contended that because there was no evidence that the grantor of the deeds at issue "had any corporate organization or capacity to hold and have title to land, or other property, . . . the deeds put in evidence on the trial were void." Id. at 466. In rejecting this argument, the Supreme Court held that if a person enters into a contract that identifies the other party as a corporation, then the contract "is prima facie evidence against such person that such corporation was in existence de facto at least, at the time of the contract with or purchase from it[.]" Id. at 466-67. Because the deeds at issue identified the grantor as a corporation, no further evidence was necessary to establish that the grantor was a corporation. Thus, for that issue, "[a] corporate name" in the deed "is essential[.]" Id. at 468. However, with respect to the second issue before the Supreme Court -- the fact that the company was sometimes called Deep River Mining Company and other times Deep River Copper Mining Company -- "[i]f the name is expressed in the written instrument, so that the real name can be ascertained from it, this is sufficient; but if necessary, other evidence may be produced to establish what corporation was intended." Id.
Consistent with Ryan, this Court in Tomika did not rely upon the fact that the deed identified the plaintiff as a corporation, but rather emphasized that, apart from the deed, "[d]efendant knew it was dealing with a corporation named 'Tomika Investment' or 'Tomika Investments' . . . ." 136 N.C. App. at 497, 524 S.E.2d at 594. Neither Troy nor Tomika can be read as requiring a corporate identifier as a prerequisite to the admission of parol evidence. Ryan made plain that no special rule exists for corporations: "A misnomer of a corporation has the same legal effect as a misnomer of an individual." 91 N.C. at 468. Consequently, these decisions hold simply that in the event of a misnomer in the name of a party to a contract, including a corporation, " 'if necessary, other evidence may be produced to establish what [party] was intended.' " Troy 170 N.C. at 278, 87 S.E. at 42 (quoting Ryan, 91 N.C. at 468).
Here, the "other evidence" is fatal to defendant's argument that Blackwell Homes, Inc. was not a valid party to the Contract and failed to establish equitable ownership as defined by N.C. Gen. Stat. § 44A-7(6). In particular, among other evidence, the general warranty deeds conveying the subject real property from "Odell A. Smith Properties, LLC" to "Blackwell Homes, Inc." on 9 March 2012 clearly indicate that "Blackwell Homes, Inc." was the party to the Contract executed just a few weeks prior.
Despite this fact, defendant argues that S & F Trading Co. v. Carson, 87 N.C. App. 602, 361 S.E.2d 897 (1987), is controlling. In S & F Trading, a lease identified the lessee as " 'Carson and Associates,' " without any indication that the lessee was a corporation, and was signed by " 'Douglas B. Carson.' " Id. at 604, 361 S.E.2d at 899. The original lessor sold the property to S & F Trading Co. subject to the lease. Id. at 603, 361 S.E.2d at 898. Carson, when sued by S & F Trading Co. for breach of the lease, argued that the lease was ambiguous on its face because the lease identified the lessee as Carson and Associates, while the lease was signed by him and, therefore, the parol evidence rule did not apply. Id. at 604, 361 S.E.2d at 899. The parol evidence that Carson proffered was the fact that "there [was] no such entity as 'Carson and Associates'," and that "the original lessor . . . denied contracting with Doug Carson d/b/a Carson and Associates[.]" Id. This Court rejected Carson's arguments, holding that
Carson's attempt to avoid the parol evidence rule is circular at best. He relies on parol evidence to create ambiguity. The contract is not ambiguous on its face. There is no corporate designee anywhere on the contract; neither is there any indication that Carson signed in a representative capacity for a corporation.Id.
Significantly, S & F Trading does not cite any cases addressing misnomers in the names of parties. Troy and Ryan are still controlling. Moreover, a critical distinction exists between this case and S & F Trading. In the latter case, Carson was attempting to avoid personal liability by arguing ambiguities existed as to the identity of the actual lessee. However, the party attempting to enforce the contract had no reason to know of the corporate identity of Carson and Associates. 87 N.C. App. at 604, 361 S.E.2d at 899.
Here, on the other hand, as in Ryan and Tomika, defendant and the vendor of Lots 14 and 17 in the Contract, Odell A. Smith Properties, LLC, were well aware that "Blackwell Homes, Inc." was the actual buyer of the property and Dustin Blackwell was signing as Blackwell Homes, Inc.'s representative. In sum, the lack of a corporate identifier in the Contract did not preclude the trial court's use of parol evidence to determine that Blackwell Homes, Inc. was the purchaser and equitable owner of the subject real property.
Defendant further argues that because Dustin Blackwell executed the Contract under seal in his individual capacity, the trial court was barred from admitting parol evidence to determine that Blackwell Homes, Inc. was the equitable owner of the property. We do not agree.
In present day North Carolina, there are only a few purposes for, or effects of, entering a contract under seal. First, "[t]hough the reason for the use of a seal -- the authentication of the grantor -- has long since been completely eliminated in this State, we still require a seal in order that a deed shall have validity as a conveyance of property." Garrison v. Blakeney, 37 N.C. App. 73, 79, 246 S.E.2d 144, 148 (1978). Second, it is generally understood that "an instrument under seal 'imports consideration' to support that instrument[.]" Burton v. Williams, 202 N.C. App. 81, 88, 689 S.E.2d 174, 180 (2010) (quoting Justus v. Deutsch, 62 N.C. App. 711, 715, 303 S.E.2d 571, 573 (1983)). Therefore, "when a party executes an agreement under seal, 'the presence of [the] seal render[s] the document to which it [i]s affixed indisputable as to the terms of the underlying obligation . . . .' " Id. (quoting 58 Am. Jur. 2d Seals § 2 (2009)). Finally, it is codified by statute that a contract under seal extends the applicable statute of limitations to enforce a contract to 10 years. See N.C. Gen. Stat. § 1-47(2) (2015).
Yet, defendant, drawing upon an inference from a principle of agency law, argues that an individual's seal creates the presumption that parol evidence cannot be used to alter any terms of the contract to which the seal is affixed. Defendant cites to the " 'well established rule of law that when a contract, not under seal, is made with an agent in his own name for an undisclosed principal, either the agent or the principal may sue upon it[.]' " Woodard v. Stieff, 171 N.C. 82, 83, 87 S.E. 955, 955 (1916) (quoting Barham v. Bell, 112 N.C. 131, 133, 16 S.E. 903, 903 (1893)). This case does not, however, involve an undisclosed principal suing on a contract.
Defendant also cites to Bell v. Chadwick, 226 N.C. 598, 599, 39 S.E.2d 743, 744 (1946), for the proposition that a contract under seal is "immune from amendment, modification, or contradiction by parol." Defendant mistakes the issue before Bell and mistakes its holding. The Supreme Court in Bell opened its opinion by emphasizing that "the only question presented for decision is the competency of [the defendant signatory's] proffered testimony that in executing the notes or bonds in suit, he did not adopt, or intend to adopt, as his seal, the printed word 'Seal' appearing in brackets at the end of the line opposite his signature." Id. The Court then pointed out that the signatory had admitted in his answer that he had signed the notes and each note had the word "Seal" typed opposite his signature. Id.
The Court then held: "When it is admitted, as it is here, that the defendant signed or executed several instruments under seal, he is bound by his admission." Id. at 600, 39 S.E.2d at 744. Because of the admission, which established the terms of the documents, including that it was a document executed under seal, the defendant signatory could not testify that he did not intend to adopt the word "Seal" when he signed the documents. Id. Bell represents a straightforward application of the parol evidence rule, and nothing in that opinion holds that exceptions to that rule are inapplicable to documents signed under seal.
Indeed, contrary to defendant's arguments, our Supreme Court has previously allowed the use of parol evidence to clarify ambiguous contractual terms in a contract under seal. Davis v. Alexander, 207 N.C. 417, 419, 177 S.E. 417, 419 (1934). This Court has also acknowledged the admissibility of parol evidence in connection with contractual ambiguities in contracts under seal. See Biggers v. Evangelist, 71 N.C. App. 35, 39-40, 321 S.E.2d 524, 527-28 (1984). Furthermore, given the modern purposes and effects of a contract under seal, we can conceive of no reason that Dustin Blackwell's individual seal should prevent the use of parol evidence -- if allowed under the parol evidence rule -- to clarify that "Blackwell Homes" in fact referred to "Blackwell Homes, Inc." Consequently, we affirm the ruling of the trial court.
AFFIRMED.
Judge McCULLOUGH concurs.
Judge BRYANT concurs in the result.
Report per Rule 30(e).