McKenzie Supply Co. v. MOTEL DEV. UNIT 2

Annotate this Case

231 S.E.2d 201 (1977)

32 N.C. App. 199

McKENZIE SUPPLY COMPANY v. MOTEL DEVELOPMENT UNIT 2, INC., et al.

No. 7616SC599.

Court of Appeals of North Carolina.

January 19, 1977.

*203 Joseph C. Ward, Jr., Lumberton, for plaintiff-appellant.

Page & Britt, P.A. by W. Earl Britt, Lumberton, for defendants-appellees.

CLARK, Judge.

The sole issue raised by this appeal is whether the exclusion of the testimony of Wayne Morris and Jerry Ivey relating to the promise of Terry Owens that defendant Upchurch would pay for the electrical supplies furnished by plaintiff to Collins Electric was prejudicial error. This ruling of the trial court was based on defendant Upchurch's claim that the promise was within the statute of frauds.

When the trial court excluded the proffered testimony of the witnesses Morris and Ivey, the pleadings and stipulations and evidence had established in pertinent part the following facts:

1. Defendant Motel Development Unit 2 was the owner of the land near Lumberton on which the Ramada Inn was constructed.

2. Defendant Upchurch was the general contractor.

3. Terry Owens was the project manager for defendant Upchurch.

4. Collins Electric was the electrical subcontractor under a written agreement with defendant Upchurch to do the electrical work for $72,000.

5. At the time of the alleged conversations between the witnesses Morris and Ivey with Terry Owens in late May 1974, (a) Collins Electric was in financial difficulty, (b) the defendant Upchurch had paid to Collins Electric $51,840.00 on its $72,000 electrical subcontract.

6. After May 1974, defendant Upchurch paid additional sums for labor and supplies to complete the electrical work, which resulted in a substantial cost overrun.

In the light of these circumstances, was the testimony of the witnesses Morris and Ivey that Terry Owens promised that defendant Upchurch would pay the plaintiff for electrical supplies used in the project within the statute of frauds?

*204 The North Carolina statute of frauds, G.S. 22-1, provides in pertinent part:

"No action shall be brought . . . to charge any defendant upon a special promise to answer the debt, default or miscarriage of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party charged therewith or some other person thereunto by him lawfully authorized."

Both North Carolina and other jurisdictions have long recognized the rule that the promise to pay the debt of another is outside the statute and enforceable if the promise is supported by an independent and sufficient consideration running to the promissor. 37 C.J.S. Frauds, Statute of § 21 (1943). This rule is generally referred to as the "main purpose rule" or the "leading object rule". In Burlington Industries v. Foil, 284 N.C. 740, 202 S.E.2d 591 (1974), the court stated: "Generally, if it is concluded that the promissor has the requisite personal, immediate, and pecuniary interest in the transaction in which a third party is the primary obligor, then the promise is said to be original rather than collateral and therefore need not be in writing to be binding." See also Warren v. White, 251 N.C. 729, 112 S.E.2d 522 (1960); Note, Statute of FraudsThe Main Purpose Doctrine in North Carolina, 13 N.C.L. Rev. 263 (1935).

The trial court found as a fact that Terry Owens did not promise to pay for the electrical supplies delivered or to be delivered by plaintiff. This finding of fact is supported by the testimony of Terry Owens. Ordinarily, findings of fact supported by competent evidence are conclusive on appeal. Transit, Inc. v. Casualty Co., 285 N.C. 541, 206 S.E.2d 155 (1974).

However, in determining this crucial fact the court did not consider the excluded evidence of the promise as testified by the apparently disinterested witnesses Morris and Ivey. The exclusionary ruling of the trial court was based on the proposition that the promise of Owens was within the statute of frauds and not enforceable. There was ample competent evidence to support a finding that Upchurch had personal, immediate, and pecuniary interest in completing the construction project which included the use of electrical supplies in finishing the electrical work subcontracted to Collins Electric. At the time the promise was made defendant Upchurch had paid to Collins Electric $51,840.00 under a subcontract for $72,000, and defendant Upchurch had sufficient allocated funds remaining for paying plaintiff's account. Upchurch's interest in completing the electrical work as specified in the subcontract with Collins Electric was evidenced by the expenditure of more than $30,000 on this phase of the project after 5 June 1974, when the last payment was made to Collins. Whether Owens, whose authority as agent for Upchurch was not questioned, made the promise was crucial to plaintiff's case. The trial court erred in excluding this testimony of the witnesses Morris and Ivey on the ground that as a matter of law the promise was within the statute of frauds and not enforceable. This error resulted in the exclusion of evidence crucial to the determination of the case and was prejudicial to the plaintiff. Eaves v. Coxe, 203 N.C. 173, 165 S.E. 345 (1932).

This error relates only to defendant Upchurch, and not, as plaintiff argues, to both Upchurch and Federal Insurance Company. Plaintiff did not except to the finding that on the date its lien was filed, there were no funds owed by Upchurch to Collins Electric. Where there are no effective exceptions to the findings of fact, the findings will be presumed to be correct and a judgment supported by the findings will be affirmed. See cases cited in 1 Strong, N.C. Index, Appeal and Error, § 57.1 (3d Ed. 1976).

The judgment is reversed and this cause is remanded for a

New Trial.

PARKER and HEDRICK, JJ. concur.