Parker v. Bennett , 32 N.C. App. 46 ( 1977 )

231 S.E.2d 10 (1977) 32 N.C. App. 46

William Lee PARKER and wife, Mae Ellen Kennedy Parker
v.
Paul A. BENNETT and wife, Zephya P. Bennett.

No. 7623SC336.

Court of Appeals of North Carolina.

January 5, 1977. Certiorari Denied March 7, 1977.

White & Crumpler by Harrell Powell, Jr., Carl F. Parrish, Winston-Salem, and William G. Ijames, Jr., Mocksville, for plaintiffs.

Peebles & McConnell by Joel C. McConnell, Jr., Winston-Salem, for defendants.

Certiorari Denied by Supreme Court March 7, 1977.

MARTIN, Judge.

The sole question presented by this appeal is whether the court erred in allowing defendants' motion for summary judgment. Plaintiffs' action is based on fraud. In their complaint, plaintiffs allege:

"6. That prior to and at the time of the transfer of the title of the above-described property by the defendants to the plaintiffs, the defendants represented to the plaintiffs that the property consisted of 125 acres. That in addition, the defendants furnished to plaintiffs maps representing the property as containing `125 acres, more or less, as per survey by Woodrow Goldsmith, Survey Engineer 9/3/68.' That the defendants on numerous occasions stated that the property contained 125 acres.

"7. That the aforesaid representations of the defendants were not true in fact but were false, and were known by the defendants to be false at the time they were made; that in fact, the tract of land consisted of approximately 95 acres. That these false representations were made by the defendants with the intent to deceive the plaintiffs and to induce the plaintiffs to purchase the said property, and that they did, in fact, deceive the plaintiffs, and in reliance upon them, the plaintiffs purchased the said property from the defendants.

"7. That the plaintiffs would not have entered into the contract except for the trust and confidence they had in the representations of the defendants as to the quantity of the land. That the actual quantity of the land and the falsity of the defendants' representations were not apparent or ascertainable to the plaintiffs upon their inspection of the land. That the plaintiffs reasonably relied on the fraudulent representations as to the amount of acreage, both from the aforementioned maps and oral representations. That because of the material and fraudulent inducements of the defendants, the plaintiffs entered into this contract to their detriment."

The written instruments, in their chronological order, leading up to the deed of conveyance by Paul A. Bennett and wife to William C. Parker and wife, are as follows:

20 June 1974 - Exhibit A (original) entitled "Offer
To Purchase Real Estate" and
signed by William C. Parker and
Ellen K. Parker
20 June 1974 - Acceptance of offer to purchase
signed by Paul A. Bennett and
Zephya P. Bennett
1 July 1974  - Plaintiffs' Exhibit No. 3 Appraisal
of Green Acre Farm by Paul A. Bennett
s/ (illegible) C.R.E.A.
5 July 1974  - Offer to purchase Green Acre Farm
signed by William L. Parker, Purchaser,
Ellen Kennedy Parker, Purchaser,
Paul A. Bennett, Seller, Zephya P.
Bennett, Seller
30 July 1974 - Deed from Paul A. Bennett and
wife, Zephya P. Bennett, Sellers, to
William Lee Parker and wife, Ellen
Kennedy Parker

Those instruments designated signed 20 June 1974, one of which is exhibit A and the other plaintiffs' exhibit 6, which are essentially the same, contain the following words:

"It is expressly understood and agreed:

"1. That no representations other than those expressed herein, either oral or written, have been made by Paul A. Bennett Realty Co., Inc., and more specifically, no representations or warranties have been made by Paul A. Bennett Realty Co., Inc., agent, concerning:"

* * * * * *

"(c) Precise lot dimensions."

* * * * * *

"3. Paul A. Bennett Realty Co., Inc. is not bound by or responsible for any agreement between any of the parties herein unless said agreement is in writing and is signed by an authorized representative of said Paul A. Bennett Realty Co., Inc."

Defendants contend that summary judgment was properly granted because plaintiffs' evidence of fraud is inadmissible under the parol evidence rule which states that:

"When a contract is reduced to writing, parol evidence cannot be admitted, to vary, add to, or contradict the same. But when a part of the contract is in parol and part in writing, the parol part can be proven if it does not contradict or change that which is written." (Citation omitted.) Stern v. Benbow, 151 N.C. 460, 462, 66 S.E. 445, 446 (1909).

Consequently, defendants contend that evidence of oral guarantees on the part of defendants was inadmissible due to the specific statements in both purchase contracts that no representations were made as to "precise lot dimensions." We disagree.

The North Carolina Supreme Court has held that

". . . in the absence of fraud or mistake or allegation thereof, parol testimony of prior or contemporaneous negotiations or conversations inconsistent with the writing, or which tend to substitute a new and different contract from the one evidenced by the writing, is incompetent." (Citations omitted.) Neal v. Marrone, 239 N.C. 73, 77, 79 S.E.2d 239, 242 (1953) (emphasis added).

Moreover, it has been stated that

"[A]n action for fraud inducing the execution of a contract is not on the contract but in tort, and the rule that prior negotiations are merged in the writing does not apply." 4 Strong, N.C. Index 2d, Fraud, § 11 (1968).

Therefore, we feel that allegations and evidence as to prior negotiations are competent when relevant to the question of fraudulent intent or deception. See Fox v. Southern Appliances, 264 N.C. 267, 141 S.E.2d 522 (1965).

In Fox v. Southern Appliances, Justice Moore stated:

"No verbal agreement between parties to a written contract, made before or at the time of the execution of such contract, is admissible to vary its terms or to contradict its provisions. (Citation omitted.) It will be presumed that the writing merged therein all prior and contemporaneous negotiations. (Citation omitted.) But parol evidence is admissible to show that a written contract was procured by fraud, for the allegations of fraud challenge the validity of the contract itself, not the accuracy of its terms—the instrument itself, on the issue of fraud, is the subject of dispute. (Citations omitted.) Fraud alleged as a defense to the enforcement of a written contract is not an attempt to vary or contradict the terms of the contract, for if the fraud be proven it nullifies the contract. (Citations omitted.) `It is elementary that where a contract or transaction was induced by false representations, the representations and the contract are distinct and separable—that is, the representations are usually not regarded as merged in the contract * * *.'" Fox v. Southern Appliances, supra at 270, 141 S.E.2d at 525 (emphasis added).

In Hardware Co. v. Kinion, 191 N.C. 218, 219, 131 S.E. 579, 580 (1926), Chief Justice Stacy, speaking for the Court, stated the same principle as that expressed in Fox v. Southern Appliances when he commented that:

"Most of the evidence offered by the defendant to show his defense and counterclaim was excluded on the hearing for the reason, we apprehend, that it was in conflict with the written instrument, and therefore thought to be incompetent, resting as it does in parol. (Citations omitted.) The rule that no verbal agreement between the parties to a written contract, made before or at the time of the execution of said contract, is admissible to vary its terms or to contradict its provisions (citation omitted), well established and controlling in proper cases; (citation omitted), has no application where the validity of the written instrument, as here, is challenged on the ground of fraud. (Citation omitted.) The instrument itself is the subject of dispute."

The North Carolina Supreme Court has also had an opportunity to comment on clauses in contracts that preclude a party from setting up representations made before the contract was executed. In one such case, the Court stated:

"`Where the execution of the contract is produced by fraud, a party is not bound by any clause precluding him from setting up false and fraudulent representations within a proper and reasonable time.'" Wolf Co. v. Mercantile Co., 189 N.C. 322, 325, 127 S.E. 208, 209 (1925). See also 17 C.J.S. Contracts § 165a (1963) and 17 Am.Jur.2d, Contracts, § 191 (1964).

In that same case, the Court also said that:

"The conduct of the parties, their words and deeds throughout the entire treaty may be shown to the jury upon the issue of fraud." (Citation omitted.) Wolf Co. v. Mercantile Co., supra.

In Fox v. Southern Appliances, supra, like the case at bar, the plaintiffs stood on the proposition that "where the written instrument itself precludes the representation relied upon, an action on such alleged representations cannot be maintained" and cited 2 Strong, N.C. Index, Fraud, § 10 (now 4 Strong, N.C. Index 2d, Fraud, § 11) which was footnoted with the case of Wilkins v. Finance Co., 237 N.C. 396, 75 S.E.2d 118 (1953). Wilkins can be distinguished, however, from the case at bar because in Wilkins it is clear that the plaintiffs' pleadings did not allege that the execution of the documents were procured by fraud.

In an earlier case involving this same argument, the North Carolina Supreme Court stated:

". . . the defense of fraudulent representations, whereby one is induced to enter into a contract, is not founded on the contract, but, when established, vitiates and destroys it, and the restrictive stipulations contained in the contract fall with it." Machine Co. v. McKay, 161 N.C. 584, 586, 77 S.E. 848, 849 (1913).

The plaintiffs allege in their complaint "that prior to and at the time of the transfer of the title of the above-described property by the defendants to the plaintiffs, the defendants represented to the plaintiffs that the property consisted of 125 acres . . . that in fact, the tract of land consisted of approximately 95 acres." It is a well established rule that one to whom a positive and definite representation has been made is entitled to rely on such representation if the representation is of a character to induce action by a person of ordinary prudence, and is reasonably relied upon. Keith v. Wilder, 241 N.C. 672, 86 S.E.2d 444 (1955).

". . . [T]he law is settled in this State by Griffin v. Lumber Co., 140 N.C. 514, 53 S.E. 307, where it is held, approving what is said in Pollock on Torts, 293: `It seems plausible, at first sight, to contend that a man who does not use obvious means of verifying the representations made to him does not deserve to be compensated for any loss he may incur by relying on them without inquiry. But the ground of this kind of redress is not the merit of the plaintiff, but the demerit of the defendant; and it is now settled law that one who chooses to make positive assertions without warrant shall not excuse himself by saying that the other party need not have relied on them. He must show that his representation was not in fact relied upon. . . .. In short, nothing will excuse a culpable misrepresentation, short of proof that it was not relied on, either because the other party knew the truth or because he relied wholly on his own investigation or because the alleged facts did not influence his action at all. And the burden of proof is on the person who has been proven guilty of material misrepresentation.' And in Hill v. Brewer, 76 N.C. 124, Justice Bynum said that `The maxim of caveat emptor does not apply in cases where there is actual fraud.'" Machine Co. v. Bullock, 161 N.C. 1, 10, 76 S.E. 634, 637 (1912).

Rendition of summary judgment is, by the rule itself, conditioned upon a showing by the movant (1) that there is no genuine issue as to any material fact, and (2) that any party is entitled to a judgment as a matter of law. G.S. 1A-1, Rule 56(c), Kessing v. Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971).

Our inquiry, therefore, is whether the defendants were entitled to summary judgment. Rule 56(e) provides, inter alia: "When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, 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. If he does not so respond, summary judgment, if appropriate, shall be entered against him."

Even so, defendants, the movants in this case, still have the burden of showing that there is no triable issue of fact and that they are entitled to judgment as a matter of law. Page v. Sloan, 281 N.C. 697, 190 S.E.2d 189 (1972). Therefore, plaintiffs here may succeed in defending against the motion for summary judgment if the evidence produced by the movants and considered by the court is insufficient to satisfy this burden. Page v. Sloan, supra. Moreover, "`Where by the nature of things, the moving papers themselves demonstrate that there is inherent in the problem a factual controversy then, while it is certainly the part of prudence for the advocate to file one, a categorical counter-affidavit [by the plaintiff in this case] is not essential.'" (Citation omitted.) Page v. Sloan, supra at 705, 190 S.E.2d at 194.

On the motion for summary judgment, if the material offered by defendants in support of their motion fails to affirmatively negate any one or more of the essential elements of fraud they have failed to bear the burden of "clearly establishing the lack of any triable issue of fact by the record properly before the court."

We have carefully considered defendants' supporting documents and materials and conclude that the granting of summary judgment by the trial court was erroneous. We hold that defendants have failed to carry the burden of proof needed for the granting of their motion.

Whether defendants perpetrated the fraud which plaintiffs have alleged, and whether plaintiffs reasonably relied upon defendants' representations as to acreage, are questions for the jury.

"The courts have been careful to define the rights of parties to a fraudulent transaction. The purchaser has the right at his election to rescind or to keep the property and recover the difference between its actual value and its value as represented. (Citation omitted.) `The great weight of authority sustains the general rule that a person acquiring property by virtue of a commercial transaction, who has been defrauded by false representations * * * may recover as damages in a tort action the difference between the actual value of the property at the time of making the contract and the value that it would have possessed if the representation had been true.'" (Citations omitted.) Horne v. Cloninger, 256 N.C. 102, 104, 123 S.E.2d 112, 113 (1961).

Thus, in our opinion, and we so hold, that in actions such as the case at bar, where motives, intent, subjective feelings and reactions, consciousness and conscience, are to be searched, the issues may not be disposed of on summary judgment.

The judgment is reversed and the case is remanded for further and not inconsistent proceedings.

Reversed and remanded.

BROCK, C. J., and VAUGHN, J., concur.