SNML CORP. v. Bank of North Carolina

254 S.E.2d 274 (1979)

41 N.C. App. 28

SNML CORPORATION, d/b/a SNML, Inc. v. BANK OF NORTH CAROLINA, N. A., Golden Eagle of Raleigh, Inc., C. D. Spangler Construction Company, C. D. Spangler, Sr., and C. D. Spangler, Jr.

No. 7810SC675.

Court of Appeals of North Carolina.

May 1, 1979.

*278 Sheldon L. Fogel, Raleigh, for plaintiff appellee.

Poyner, Geraghty, Hartsfield & Townsend, by John J. Geraghty and Cecil W. Harrison, Jr., Raleigh, for defendant appellant Bank of North Carolina, N. A.

CARLTON, Judge.

The first question for determination is whether appellant BANK properly released the shares of common stock of the BANK held as "collateral security" in January 1975 while ad valorem taxes for the years 1973 and 1974 were still outstanding. The trial court held that the BANK'S release of the stock was improper in that the "Escrow Agreement" of 16 October 1970 between *279 the PROFIT SHARING PENSION TRUST and the BANK'S Trust Department established a fiduciary relationship between the plaintiff and appellant BANK and appellant BANK therefore became ESCROW AGENT for the plaintiff corporation and not a guarantor or surety. The trial court found that the 14 November 1967 agreement was incorporated into the ESCROW AGREEMENT and obligated the appellant to ascertain whether defendant GOLDEN EAGLE had fully performed all its covenants and agreements in the 23 August 1966 lease agreement, including the payment of ad valorem taxes and that the appellant should not have released the collateral security in January 1975 while ad valorem taxes for the years 1973 and 1974 were still outstanding.

Appellant BANK contends that the true relationships of the parties were that SPANGLERS, by reason of their pledge of stock, were to serve as sureties for the performance of GOLDEN EAGLE, the principal obligor, with the PROFIT SHARING PENSION TRUST, and subsequently the plaintiff, occupying the status of beneficiary of the pledge. Therefore, appellant argues, the release by the consent judgment of the primary obligor, GOLDEN EAGLE, also operated to discharge the appellant BANK of its duty to retain the collateral security. Put another way, appellant argues that when a creditor gives the principal debtor an unconditional release of liability, the underlying obligation has been satisfied, and the guarantor of that obligation is no longer liable on the guaranty. The crucial question, therefore, is whether the true role of appellant BANK was that of a surety/guarantor or that of an agent/fiduciary. We agree with the trial court's ruling.

A surety is one who becomes responsible for the debt, default or miscarriage of another; but in a narrower sense, a surety is a person who binds himself for the payment of a sum of money, or for the performance of something else, for another who is already bound for such payment or performance. 72 C.J.S. Principal and Surety § 2, p. 515. See also Casualty Co. v. Waller, 233 N.C. 536, 64 S.E.2d 826 (1951).

A guaranty is a collateral undertaking by one person to answer for the payment of a debt or the performance of some contract or duty in case of the default of another person who is liable for such payment or performance in the first instance. Although the contracts of guaranty and suretyship are to some extent analogous, and the terms are sometimes used interchangeably, there are nevertheless important distinctions between the two undertakings which are recognized in almost all jurisdictions. Guaranty is distinguishable from suretyship in that the former is a collateral and independent undertaking creating a secondary liability, while the latter is a direct and original undertaking under which the obligor is primarily and jointly liable with the principal. 38 C.J.S. Guaranty §§ 1, 6, pp. 1129, 1136; see also Investment Properties v. Norburn, 281 N.C. 191, 188 S.E.2d 342 (1972).

An agent is one who, by the authority of another, undertakes to transact some business or manage some affairs on account of such other, and to render an account of it. He is a substitute, or deputy, appointed by his principal primarily to bring about business relations between the latter and third persons. 2A C.J.S. Agency § 4, p. 554.

Clearly, the role of the appellant BANK was not that of guarantor or surety. Appellant was not an endorser of any instrument in the transaction. The ESCROW AGREEMENT referred to appellant BANK as the "Escrow Agent." Appellant was charged with determining if the provisions of the 23 August 1966 lease were complied with. It did not undertake to act as a surety or guarantor in any sense in the event the lessee failed to perform. Appellant simply agreed not to release any security it held unless the lessee performed its agreement under the lease agreement. From the facts before us, we must conclude that the true role of the appellant BANK was that of an agent.

*280 An agent is a fiduciary concerning the matters within the scope of his agency. The very relation implies that the principal has placed trust or confidence in the agent, and the agent or employee is bound to the exercise of the utmost good faith, loyalty, and honesty toward his principal or employer. The fiduciary relationship existing between an agent and his principal has been compared to that which arises upon the creation of a trust. The rule requiring an agent to act with the utmost good faith and loyalty toward his principal or employer applies whether the agency is one coupled with an interest, the compensation given the agent is small or nominal, or it is a gratuitous agency. "Furthermore, it has been held that the duty of an agent to be faithful to his principal does not cease when the employment ends, and it cannot be renounced at will by the termination of the relation; it is as sacred and inviolable after as before the expiration of the agency." 3 Am.Jur.2d, Agency, § 199 et seq., p. 580, and cases cited therein.

We interpret the various instruments to cast the appellant BANK in the role of an agent charged with the responsibility of determining that all the provisions of the 23 August 1966 lease were annually complied with. Among those provisions was the requirement that annual property taxes be paid. The agency relationship was to terminate on 31 December 1974. The record clearly disclosed that ad valorem taxes were not paid on the property in 1973 and 1974, prior to expiration of the agreement and that appellant BANK released the collateral security to SPANGLERS with the taxes unpaid. Indeed, appellant BANK admits that the taxes were unpaid and that the stock was delivered back to the SPANGLERS. In so doing, they violated the responsibility cast upon them as agents. The consent judgment, in which appellant BANK was in no way a part, did not relieve appellant BANK of its responsibility under the agreement.

For the reasons stated, this assignment of error is overruled.

We next turn to appellant's contention that the trial court erred in awarding an amount of damages for which there was no evidence to support.

The trial court ordered that the plaintiff recover of appellant the sum of $27,057.15, the precise amount of ad valorem taxes for the years 1973 and 1974 which plaintiff was required to pay after all other parties failed to pay. The trial court was undoubtedly following the general rule that plaintiff was entitled to damages, in an action of this nature, which naturally and proximately are caused by the breach of defendant's duty to plaintiff.

However, it is also the rule in this jurisdiction that damages are never presumed and the burden is always upon the complaining party to establish by evidence such facts as will furnish a basis for their assessment, according to some definite and legal rule, and when compensatory damages are susceptible of proof with approximate accuracy, they must be so proved. 5 Strong, N.C. Index 3d, Damages, § 15, p. 44.

[W]here actual pecuniary damages are sought, there must be evidence of their existence and extent, and some data from which they may be computed. No substantial recovery may be based on mere guesswork or inference; without evidence of facts, circumstances, and data justifying an inference that the damages awarded are just and reasonable compensation for the injury suffered. Norwood v. Carter, 242 N.C. 152, 156, 87 S.E.2d 2, 5 (1955).

In the instant case, the court did not have before it sufficient data from which to compute damages to the plaintiff. It is true that the court had evidence, by way of stipulation, of the amount of ad valorem taxes which were paid by the plaintiff. However, the court did not have evidence by way of stipulation or otherwise, of the value of the collateral security released by appellant. Without such evidence, there was no way to accurately determine how much the release of the collateral harmed the plaintiff. Since defendant's breach consisted of wrongfully releasing *281 the collateral security, the value of that collateral was necessary to determine plaintiff's damage. Obviously, plaintiff may not be entitled to the full amount of taxes paid if the value of the released collateral would have been insufficient to pay those taxes.

This assignment of error is sustained. This part of the judgment must be vacated and remanded for further proceedings consistent with this portion of our opinion. On remand, the superior court will only give further consideration to the amount of plaintiff's damages. Plaintiff should not again be put to trial on the question of entitlement. Lieb v. Mayer, 244 N.C. 613, 94 S.E.2d 658 (1956).

For the reasons stated, the judgment of the lower court is

Affirmed in part, vacated in part and remanded.

PARKER and HEDRICK, JJ., concur.