Investment Properties of Asheville, Inc. v. Norburn

188 S.E.2d 342, 281 N.C. 191, 1972 N.C. LEXIS 1045

• Court: Supreme Court of North Carolina
• Decided: May 10, 1972
• Docket: 54
• Status: Published

Opinion

MOORE, Justice.

Plaintiffs allege that defendant Norburn is liable for the actual cost of the grading and seeding done on Allen’s property by reason of the guaranty agreement executed by Norburn. Defendant Norburn alleges that this guaranty agreement was not based on a legal consideration and contends that the jury correctly found that the defendant did not receive a valuable consideration from plaintiffs for the execution and delivery of this guaranty.

A guaranty of payment is an absolute promise by the guarantor to pay a debt at maturity if it is not paid by the principal debtor. This obligation is separate and independent of the obligation of the principal debtor, and the creditor’s cause of action against the guarantor ripens immediately upon the failure of the principal debtor to pay the debt at maturity. Milling Co. v. Wallace, 242 N.C. 686, 89 S.E. 2d 413 (1955). The language in the guaranty signed by defendant Norburn created an unconditional promise to pay in cash for the actual cost of the land preparation of Allen’s property in case the lease (of 10 May 1965) was not continued after 1 June 1966, or in lieu of cash to deed to Robertson 734 acres of land in Ashe County. This language was sufficient to constitute a guaranty of payment. Credit Corp. v. Wilson, 281 N.C. 140, 187 S.E. 2d 752 (1972).

The jury found that the lease in question was not continued after 1 June 1966, and, in accordance with a peremptory instruction, further found that the guaranty agreement was executed by defendant. The determinative issue then is: Did defendant Norburn receive valuable consideration from the plaintiffs for the execution and delivery of this guaranty agreement?

It is well-settled law in this State that in order for a contract to be enforceable it must be supported by consideration. A mere promise, without more, is unenforceable. Scott v. Foppe, 247 N.C. 67, 100 S.E. 2d 238 (1957); Jordan v. Maynard, 231 N.C. 101, 56 S.E. 2d 26 (1949); Stonestreet v. Oil Co., 226 N.C. 261, 37 S.E. 2d 676 (1946); 2 Strong, N. C. Index 2d, Contracts § 4. As a general rule, consideration consists of some benefit or advantage to the promisor or some loss or detriment to the promisee. However, as stated by Chief Justice Stacy in Stonestreet v. Oil Co., supra:

“ ... It has been held that ‘there is a consideration if the promisee, in return for the promise, does anything legal which he is not bound to do, or refrains from doing anything which he has a right to do, whether there is any actual loss or detriment to him or actual benefit to the promisor or not.’ 17 C.J.S. 426; Spencer v. Bynum, 169 N.C. 119, 85 S.E. 216; Basketeria Stores v. Indemnity Co., 204 N.C. 537, 168 S.E. 822; Grubb v. Motor Co., 209 N.C. 88, 182 S.E. 730, and cases cited.”

It is not necessary that the promisor receive consideration or something of value himself in order to provide the legal consideration sufficient to support a contract. Forbearance to exercise legal rights is sufficient consideration for a promise given to secure such forbearance even though the forbearance is for a third person rather than that of the promisor. Myers v. Allsbrook, 229 N.C. 786, 51 S.E. 2d 629 (1949). In a guaranty contract, a consideration moving directly to the guarantor is not essential. The promise is enforceable if a benefit to the principal debtor is shown or if detriment or inconvenience to the promisee is disclosed. 38 Am. Jur. 2d, Guaranty § 43, p. 1046.

In Cowan v. Roberts, 134 N.C. 415, 46 S.E. 979 (1904), this Court held that a promise to pay for goods delivered to the principal was sufficient consideration to support the contract of guaranty. The guaranty in that case was as follows:

“Knoxville, Tenn., 8 April, 1899

“I hereby guarantee to Cowan, McClung & Co., any debts which Roberts Bros, now owe, or may owe in the future, to the extent of two thousand dollars. This obligation to remain in full force until the debt now due Cowan, McClung & Co. is fully discharged and this agreement annulled in writing.

W. S. Roberts.”

Although W. S. Roberts received nothing of value, the Court held the delivery of merchandise to Roberts Bros, by Cowan, McClung & Co., by reason of this guaranty, was sufficient consideration to hold the guarantor, W. S. Roberts, liable for the amount owed at the time of the guaranty, and for merchandise delivered to Roberts Bros, after the guaranty was executed.

In the case before us plaintiffs assign as error the failure of the trial court to instruct the jury that the contract of guaranty given by defendant Norburn was supported by sufficient legal consideration if a third party, Allen, received benefits from the plaintiffs by their furnishing additional services of benefit to her property, and that it was not necessary for the defendant Norburn to receive consideration or something of value himself in order to provide the legal consideration sufficient to support the contract of guaranty. This assignment is well taken.

G.S. 1-180, as now incorporated in G.S. 1A-1, Rule 51, required the judge to explain and apply the law to the specific facts pertinent to the issue involved. A mere declaration of the law in general terms was not sufficient to meet the requirements of the statute. Saunders v. Warren, 267 N.C. 735, 149 S.E. 2d 19 (1966). It is the duty of the court, without a request for special instructions, to explain the law and to apply it to the evidence on all substantial features of the case. Melton v. Crotts, 257 N.C. 121, 125 S.E. 2d 396 (1962). A failure to do so constitutes prejudicial error for which the aggrieved party is entitled to a new trial. Cornell v. Gaskins, 263 N.C. 212, 139 S.E. 2d 202 (1964).

The court in the charge to the jury in this case correctly stated: “There must be a sufficient consideration in order to support a contract or legal agreement. Any benefit, right or interest accruing to the one who makes the promise or guaranty, or any forbearance, detriment or loss suffered or undertaken by one to whom the promise for guaranty is made is a sufficient consideration to support such guaranty or contract.” Thereafter, the court charged the jury: “I charge you that if the plaintiffs have satisfied you by the greater weight of the evidence that the defendant Norburn received a valuable consideration for the execution and delivery of the guaranty it will be your duty to answer the issue ‘Yes.’ If the plaintiffs have failed to so satisfy you it would be your duty to answer the issue ‘No.1 ” Under this charge the jury might well have understood that they were required to find that defendant Norburn himself received a valuable consideration to support his guaranty. In view of the facts in this case, this was too restrictive.

The jury should also have been instructed that if, by reason of the guaranty signed by defendant Norburn, Allen received benefits from the plaintiffs by their furnishing additional work on her property, including fertilizing, seeding, and additional leveling, or if Asheville Contracting Company, at the request of plaintiffs, did additional work upon the Allen property and thereby incurred added expense by reason of this guaranty, either would be sufficient legal consideration to support such guaranty.

The failure to so charge the jury is error for which plaintiffs are entitled to a new trial. The other assignments of error are not considered since they may not recur at the next trial.

New trial.