Smith v. Hudson

269 S.E.2d 172 (1980)

48 N.C. App. 347

Edward T. SMITH and Deborah B. Smith v. Will A. HUDSON, Individually and in his Capacity as agent for Will Hudson, Limited, a corporation and in his capacity as agent for First National Realty, Inc., a corporation and Will Hudson, Ltd., a corporation and First National Realty, Inc., a Corporation.

No. 7910SC1111.

Court of Appeals of North Carolina.

August 19, 1980.

*176 Shyllon, Shyllon & Ratliff by Ernest E. Ratliff, Raleigh, for plaintiffs-appellants.

Seay, Rouse, Johnson, Harvey & Bolton by George H. Harvey, Raleigh, for defendants-appellees.

CLARK, Judge.

At the outset we note that defendants failed to plead affirmatively in their answer the defenses of failure of consideration and the statute of frauds as required by N.C.Gen.Stat. § 1A-1, Rule 8(c), and they thereby waive their right to assert these defenses. Yeager v. Dobbins, 252 N.C. 824, 114 S.E.2d 820 (1960); Grissett v. Ward, 10 N.C.App. 685, 179 S.E.2d 867 (1971). Although not wholly determinative, it is significant that defendants made no motion to amend their pleadings and plaintiffs had no notice that such a defense would be raised. Grissett v. Ward, supra; Young v. Young, 43 N.C.App. 419, 259 S.E.2d 348 (1979), (failure to plead laches under Rule 8(c)).

Even if defendants had effectively pled N.C.Gen.Stat. § 22-2, the contract nonetheless meets the requirements of the statute. First, the description of the underlying land, in the offer to purchase, "Lot # 66, Sherwood Forest S/D," "the property located at 601 King Richard Road, Raleigh, N. C. 27610" was sufficient to meet the specificity requirements of the statute of frauds. Furthermore, N.C.Gen.Stat. § 22-2 does not apply to the construction of a house, as compared to a house already built, because a house not-built is not an "interest in realty." Rankin v. Helms, 244 N.C. 532, 94 S.E.2d 651 (1956); Webster, Real Estate Law in North Carolina, §§ 12 to 18 (1971) (real fixtures). See also, Thompson v. Horrell, 272 N.C. 503, 158 S.E.2d 633 (1968); Gurganus v. Hedgepeth, N.C.App., 265 S.E.2d 922, 923 (1980); Wise v. Isenhour, 9 N.C.App. 237, 175 S.E.2d 772 (1970) (cases interpreting "interests in land" within N.C.Gen.Stat. § 1-76).

"In most construction and home improvement contracts, the contract will be for services or for labor and materials and not a sale of goods within Article 2 of the [Uniform Commercial] Code." 1 Anderson, Uniform Commercial Code, § 2-105.11 (1970) and § 2-201.15 (1979 Cum.Supp.). In some circumstances, however, the sale of building materials to be used in the construction of a house may come within the statute of frauds provisions of the Uniform Commercial Code if the value of the building supplies (as goods) prior to construction exceeds $500.00. N.C.Gen.Stat. § 25-2-201; Lowe's Companies, Inc. v. Lipe, 20 N.C.App. 106, 201 S.E.2d 81 (1973). In Lowe's the contract at issue was between the supplier and either the builder or the party for whom the house was to be built. The statute of frauds in N.C.Gen.Stat. § 25-2-201 was successfully pleaded as a defense. In the instant case, however, the contract was a "hybrid" contract to purchase an unspecified mixture of goods and services and the statute of frauds was not pleaded. Consequently, while we believe that it will always be the better practice that all contracts to construct improvements on realty include the written specifications of the structure to be built and the contents to be included therein, we can find no authority in this jurisdiction requiring that such a contract be in writing.

Similarly, in addition to their failure to assert the statute of frauds, the defendants have neither invoked the parol evidence rule as to any prior negotiations leading to the signing of the purchase agreement nor challenged any of plaintiffs' oral testimony as in any way inconsistent with the terms of the written purchase agreement, and as a consequence, the parol evidence was admissible to establish the whole of the contract even though only part of the agreement was reduced to writing. Rankin v. Helms, supra; N.C.Gen.Stat. § 25-2-202(b); 32A C.J.S. Evidence § 1003(14)b. (1964).

The remaining two issues are, therefore, whether the plaintiffs introduced sufficient evidence from which it could be concluded *177 that a contract was formed and breached by defendants and whether the plaintiffs were required to show that they could comply with the terms of the loan commitment from Raleigh Savings and Loan Association.

The plaintiffs offered the following evidence of contract formation: (1) the existence of a written contract, signed by defendant Hudson, to purchase a specifically described parcel of realty upon which a 1400 square foot house with certain features, including an orthopedic shower and entrance ramp to accommodate the handicaps of Mr. Smith (these latter provisions were subsequently deleted by mutual agreement of the parties); (2) an oral agreement between Mr. Hudson and Mr. Smith that the hallways in the house were to be 42 inches wide, that the garage was to be wider to accommodate plaintiff's special van; that the bathroom basin was to be specifically placed; that the lot was to be graded to create the appropriate inclines; that the electrical outlets were to be placed 12 to 15 inches from the floor; and that the doors were to be 36 inches wide; (3) the transfer of earnest money to Hudson, and acceptance thereof by Hudson on two different occasions; (4) defendant Hudson's selection of a set of house plans and the defendant Hudson's offer in his letter of 8 October 1976, to provide plaintiffs with "plans, spec. etc." even though he could not build their house; (5) the defendant Hudson's promise in September to start construction within a few days; (6) defendant Hudson's statement (although a purportedly false statement) that a building permit for the house had been obtained; and (7) defendant Hudson's request to build the house facing Providence Road rather than King Richard Road. The evidence is sufficient for a jury to conclude that the plaintiffs and defendants entered into a contract whereby Hudson, through one of his corporations, was to construct a barrier-free home according to the plans and specifications agreed upon by the parties and that plaintiffs were to pay defendants a total of $35,000 for the lot with the house constructed thereon.

The defendants argue that there was never a "meeting of the minds" between the parties and that the "offer to purchase" was not a contract but only an agreement to start negotiations. We do not agree. The cases Boyce v. McMahan, 285 N.C. 730, 732, 208 S.E.2d 692 (1974); Elks v. Insurance Co., 159 N.C. 619, 75 S.E.2d 808 (1912); and Howell v. C. M. Allen & Co., 8 N.C.App. 287, 174 S.E.2d 55 (1970), relied upon by the defendants to establish this position, are inapposite. In Boyce there was a writing stating that "[t]he parties hereto agree to supplement this preliminary agreement by executing a more detailed agreement at some specific and subsequent date to be agreed to by the parties hereto." In the instant case there was no such "contract to contract" at some future date. The plaintiffs' evidence tends to show that any changes which occurred were modifications of an already existing contract as opposed to an agreement to contract in futuro. In Elks there was a series of letters evidencing negotiations leading to a contract to make a loan, a contract which was held not to be consummated since there had been no agreement as to the terms of the loan, when the loan was payable, and the lender's priority in the security. Similarly, in Howell, the essential price term was missing. In the case at bar the price, the settlement date, and when the contract amounts were to be paid were all specified in the written offer to purchase which was signed as "accepted" by defendant Hudson.

The defendants argue, however, that the plaintiffs cannot recover because they have failed to show that they could have complied with all of the terms of the loan commitment issued by Raleigh Savings and Loan. We see no merit in this argument. The written offer to purchase is contingent only upon the ability of the plaintiffs to obtain a conventional thirty-year loan and there is no evidence of any requirement in the contract between plaintiffs and defendants that the specific terms of the Raleigh Savings and Loan Commitment must be met or that other lenders could not be sought. Furthermore, the obligation of plaintiffs under the loan commitment to supply the title insurance, survey, etc. would not have arisen prior to the time *178 of closing. Hudson's letter of 8 October 1976 stating that he could not construct the house eliminated any requirement that the plaintiffs fulfill any subsequent obligations under the contract.

The plaintiffs have offered enough evidence from which a jury could conclude that a contract between the parties was made and that defendants breached this contract, thereby entitling plaintiffs to recover, as a minimum, nominal damages. No issue of damages was raised in this appeal.

The judgment of the trial court is Reversed and the cause is Remanded.

MORRIS, C. J., and ERWIN, J., concur.