Cargill, Inc. v. Neuse Prod. Credit Ass'n , 26 N.C. App. 720 ( 1975 )

217 S.E.2d 105 (1975) 26 N.C. App. 720

CARGILL, INCORPORATED
v.
NEUSE PRODUCTION CREDIT ASSOCIATION, INCORPORATED.

No. 7511SC317.

Court of Appeals of North Carolina.

August 6, 1975.

Robert A. Spence, Smithfield, for plaintiff.

L. Austin Stevens, Smithfield, for defendant.

CLARK, Judge.

In its motion for directed verdict, defendant relied on a number of alternative grounds, one being that plaintiff failed to show that defendant had in any way breached the oral agreement. In this regard, defendant relies on the testimony of plaintiff's district manager who testified that defendant agreed to reissue checks only on the terms which defendant exacted which implicitly required that the Woods execute new notes to defendant before reissuing checks to the plaintiff. It is specifically argued that this was a condition precedent to defendant's obligation to reissue checks to plaintiff.

The plaintiff points out that conditions precedent are not favored by the law, Jones v. Realty Co., 226 N.C. 303, 37 S.E.2d 906 (1946), and that when operative words can be construed as a promise rather than a condition, there is a presumption in favor of promise. Nevertheless, ". . . the supposed presumption of promise rather than condition will not often be the decisive matter in a case. Such a presumption does not relieve the court of the necessity of interpretation; and the process of interpretation will usually be decisive without making use of this presumption." 3A Corbin, Contracts, § 635 at 38-9 (1960).

Conditions precedent ". . . are those facts and events, occurring subsequently to the making of a valid contract, that must exist or occur before there is a right to immediate performance, before there is a breach of contract duty, before the usual judicial remedies are available." 3A Corbin, Contracts, § 628 at 16 (1960). On the other hand, one who makes a promise expresses an intention that some future performance will be rendered and gives the promisee assurance of its rendition.

Basically, two questions, then, are relevant to the issue to be decided: (1) Was the expression intended to be an assurance by one party to the other that some performance by the first would be rendered in the future and that the other could rely on it, or (2) was the expression intended to make the duty of one party conditional and dependent upon some other fact or event? If from the operative words of the agreement, the answer to the former question is in the affirmative, the words are that of promise. If the operative words suggest an affirmative answer to the latter question, the relevance performance, fact or event is a condition.

Of particular relevance to the agreement in the present case is Restatement of Contracts, § 260 (1932) which provides as follows:

"If in an agreement words that state that an act is to be performed purport to be the words of the person who is to do the act, the words are interpreted, unless a contrary intention has been manifested, as a promise by that person to perform the act. If the words purport to be those of a party who is not to do the act they are interpreted, unless a contrary intention has been manifested, as limiting the promise of that party by making performance of the act a condition."

In the three-party arrangement agreed upon by the plaintiff, defendant and the Woods in the defendant's office with regard to the method by which defendant could aid the plaintiff and the Woods in their hog feed account problem, it is apparent that the operative words by which defendant's performance in reissuing checks would be triggered was the execution by the Woods of new notes to defendant. This arrangement enabled the defendant to credit the Woods' old account which showed a deficit while yet providing defendant with new security in the new notes. Consequently, the purported promise to perform the execution of new notes was that of the Woods and, as the agreement manifested, the defendant required that act before it would reissue checks to plaintiff. That act, being under the volitional control of the Woods, was a condition to defendant's performance. See 3A Corbin, Contracts, § 638 (1960).

Finally, the non-occurrence of a condition will prevent the existence of a duty in the other party and will not create remedial rights unless that other party has promised that it would occur; and the only persons who could conceivably have promised execution of new notes were the Woods. We find that the execution of new notes was a condition precedent to defendant's duty to reissue checks to plaintiff and that no breach therefore is shown either in plaintiff's complaint or evidence. The action of the trial court in granting defendant's motion for directed verdict and entering judgment in accordance therewith is

Affirmed.

MORRIS and VAUGHN, JJ., concur.