Industrial Distributors, Inc. v. Mitchell

Annotate this Case

122 S.E.2d 61 (1961)

255 N.C. 489


No. 172.

Supreme Court of North Carolina.

October 11, 1961.

*62 Josey & Clark, Roanoke Rapids, for plaintiff appellee.

Charles M. White, III, and John Kerr, Jr., Warrenton, and Gaither M. Beam, Louisburg, for defendant appellants.

RODMAN, Justice.

Defendants did not offer evidence sufficient to justify the submission of an issue of damages resulting from the asserted breach of warranty.

Defendants' claim of error is based on their plea that the debt evidenced by the note was due and payable more than three years prior to 30 September 1958, the date this action was instituted. Hence the court could not peremptorily instruct the jury to return a verdict in any sum for plaintiff.

The parties are in agreement on these facts: Plaintiff, in the summer of 1955, sold to defendants, farmers, the equipment enumerated in exhibit A for use in irrigating defendants' crops. It was a cash sale. When the equipment was delivered in July, defendants did not have the monies to pay for it. They borrowed from Citizens Bank of Warrenton $1874.35, and as evidence of the debt so created, the defendant R. C. Mitchell executed a note "due on the 23rd day of October, A.D. 1955" and secured payment of that note by a mortgage on the properties described in exhibit A. That note contains this additional provision: "If $624.79 is paid on due date, balance will *63 be carried provided $624.79 is paid on October 23, 1956 and the balance of $624.77 is paid on October 23, 1957." The note also contained this clause: "All the above property is my own, and no other claim thereon." From the monies so borrowed defendants paid to plaintiff the sum of $1750, leaving a balance owing of $899.97. The note in suit was intended to represent that balance. The vice president of plaintiff testified: "The defendant said that was all the bank would lend him so we then took a note for the difference of $899.97." "Mr. Mitchell asked me to put on that note `after said bank,' which I had to do in order to go along with him because he had not paid. * * * It was Mr. Mitchell's intention at that time to pay me after he had paid off the bank * * *."

The evidence shows absence of consideration as between Citizens National Bank and defendants. Had payee brought an action in its name on the note, defendants' plea of want of consideration would, on the evidence, have sufficed to defeat the claim. Mills v. Bonin, 239 N.C. 498, 80 S.E.2d 365; G.S. § 25-33.

Plaintiff, according to its allegation, acquired the note by transfer on 15 July 1958. That date was subsequent to maturity as plaintiff would fix the time for payment. Plaintiff is not the holder of a valid negotiable instrument acquired before maturity. It is not protected by G.S. § 25-63.

The instrument was intended as a contract between plaintiff and defendant (1) to fix the time when plaintiff could require payment of the balance owing for the irrigation equipment, or (2) to create a lien on the equipment securing payment of this balance, or (3) both of these purposes.

The parties used this language to express their agreement: "On demand after bank on said equipment ____ days after date, we Promise to pay * * *." What is the meaning of the phrase "after bank on said equipment"? Does it mean that plaintiff could not demand payment until maturity of the debt to the Citizens Bank of Warrenton? Plaintiff now so contends. Or does it mean that the lien created was subordinate to the lien given the Bank of Warrenton? Defendants so contend. The language was inserted at the request of defendant R. C. Mitchell. Plaintiff's vice president who procured execution of the note testified: "It was Mr. Mitchell's intention at that time to pay me after he had paid off the bank at Warrenton, or after the last payment was due in 1957." He further testified: "We started trying to collect the account as soon as the note was signed. We started right away. We sent the note to a lawyer in Warrenton for collection. According to our original agreement, the note was due and Mr. Mitchell knew it was due. * * * I got Mr. Mitchell to sign a note on September 1, 1955, merely as security for Industrial Distributors inasmuch as he had failed to pay the cash all at one time. He had violated his agreement to pay me the cash for the entire system at one time. So, not knowing Mr. Mitchell's financial status too well, I decided it was best to have some evidence of debt, therefore I tried to collect the note then. I did not agree to carry this as an open account. * * * we asked Mr. Mitchell for the money and thought it was a cash deal, and the note was merely some form that I could take back to my company to justify not having the cash. * * * I was trying to collect the note all the time."

The defendant R. C. Mitchell, a witness in his own behalf, was asked: "What does that mean, `after the bank'?" He replied: "I did not want the mortgage at the bank and him to have another mortgage. I wanted to be sure this man knew the bank had a mortgage at the time." There was additional testimony from defendant which a jury might interpret as meaning defendant used the words "after bank" as meaning demand for payment could not be made until the time for payment of the note given Bank of Warrenton had passed.

*64 The evidence was sufficient for the jury to find: (1) There was no meeting of the minds as to the meaning of the phrase "after bank on said equipment." In that event the writing did not constitute a binding contract. Goeckel v. Stokley, 236 N.C. 604, 73 S.E.2d 618; Dodds v. Trust Co., 205 N.C. 153, 170 S.E. 652. (2) There was recognition of plaintiff's right to forthwith require payment but the lien on the equipment was junior to the lien of Bank of Warrenton. This interpretation accords with plaintiff's conduct immediately following the execution and delivery of the document. An interpretation of a writing made by the parties at a time when no controversy existed is strong evidence of the meaning of the language used. Cole v. Industrial Fibre Co., 200 N.C. 484, 157 S.E. 857. (3) The time fixed for payment had been postponed to the maturity of the note given Bank of Warrenton.

If the jury should find that parties did not make a binding contract on 1 September, defendants' debt was payable on delivery of the equipment. This was in July 1955. Plaintiff's right of action would, in that event, be barred. If the jury should find the parties understood that plaintiff's right to demand payment was not postponed but a lien was given in the hope that forbearance would be extended, plaintiff's cause of action accrued on the date the note was given and hence would be barred. Caldwell v. Rodman, 50 N.C. 139. If the jury should find the right to demand payment was postponed until after maturity of the note to Bank of Warrenton, the cause of action was not barred.

It would have been far simpler and better practice, Baker v. Malan Construction Corp., N.C., 121 S.E.2d 731, to have submitted an appropriate issue addressed to defendants' plea of the statute of limitations rather than a simple issue of debt. The amount of the debt was not in controversy. The peremptory instruction in plaintiffs' favor is necessarily predicated upon the court's assumption that in no event could the jury find facts which would bar plaintiffs' right of action. This assumption was erroneous.

New trial.