Opinion
No. 2:98CV257-C
April 26, 2000
MEMORANDUM AND ORDER
THIS MATTER is before the court upon defendant's Motion for Re-Hearing. Plaintiff's Motion for Summary Judgment, filed November 1, 1999, was supported by a memorandum of law and extensive exhibits. Defendant's deadline for filing a response to plaintiff's motion was November 18, 1999, and despite the passage of 90 days, no response in opposition was ever filed. See Local Rule 7.1(B), W.D.N.C. In moving for "re-hearing," defendant has failed to show excusable neglect, Fed.R.Civ.P. 6(b)(2), for his failure to comply with either Local Rule 7.1 (B) or the requirements of Rule 56(e), which provides:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
Finally, review of the court's docket reveals that counsel for defendant is not a member of the North Carolina Bar or the Bar of this court and failed to seek special admission at any time after he removed the matter to this court. Counsel for defendant shall take action immediately to correct his unauthorized practice of law before this court.
Beyond such procedural issues, defendant has argued that this court "misapprehended the application of the North Carolina parole [sic] evidence rule as it pertains to the defense of accord and satisfaction." It is defendant's contention in his amended answer, as well as in his deposition, that plaintiff's Chief Executive Officer told him that if he did not want to join the other doctors as a tenant, he could leave town prior to the expiration of the three-year period and his repayment obligation would be forgiven. Further, defendant asserts that the agreed-to consideration for such $95,374.90 forgiveness was (a) his forbearance in not telling members of the community his real reason for leaving or (b) his past performance.
Section 4.06 of the undisputed contract provides that such writing is the entire agreement between the parties and that it may not be changed orally . . . Defendant's testimony concerning the alleged oral promise by plaintiff's Chief Executive Officer, Mike Zuliani, as to forbearance would contradict the terms of the written agreement by altering the repayment provision and the no-oral-modification clause.
North Carolina's parol-evidence rule provides that when a contract is reduced to writing, parol evidence cannot be admitted to vary, add to, or contradict it. Hoots v. Calaway, 282 N.C. 477, 486, 193 S.E.2d 709, 715 (1973). In the Motion for Re-Hearing, defendant argues for the first time that North Carolina law would not exclude subsequent oral agreements, even where the written agreement has a no-oral-modification clause.
North Carolina law is limited on the precise issue of whether an integrated contract containing a no-oral-modification provision may be modified by subsequent oral agreement. The Court of Appeals for the Fourth Circuit has not ruled on this exact issue, but has ruled on a similar issue, as follows:
Under North Carolina law, the parol evidence rule prohibits the admission of parol evidence to vary, add to, modify, or contradict a written instrument intended to be the final integration of a transaction.
The [district] court was willing to accept reliable evidence of modifications or agreements allegedly made after the document's execution.Vernon Carlton Sales Inc. v. SSMC, Inc., 53 F.3d 330 (Table), 1995 WL 263496, 3 (4th Cir. 1995)(citing Munther-Ballenger v. Griffin Elec. Consultants, 397 S.E.2d 247, 250 (N.C.Ct.App. 1990) (parol-evidence rule does not bar evidence of oral modifications made subsequent to the written contract)). Munther-Ballenger does not address the precise issue of whether parol evidence is admissible where the written contract contains a no-oral-modification provision.
The issue becomes whether North Carolina law would allow parol evidence of a subsequent agreement where the earlier agreement contained a clear no-oral-modifications provision. Absent an unambiguous North Carolina decision, the court has turned to general contract principles, which this court believes a North Carolina court would follow. Other states have found that a "fully integrated written contract," i.e., one containing a clause stating that subsequent modifications must be in writing, may be modified by a subsequent oral agreement. Cambridgeport Sav. Bank v. Boersner, 413 Mass. 432, 597 N.E.2d 1017, 1022 (Mass. 1992). In perhaps the most colorful illumination of this contract principle, the Pennsylvania Supreme Court held in Wagner v. Graziano Const. Co., 390 Pa. 445, 136 A.2d 82, 83 (Pa. 1957), as follows:
The most ironclad written contract can always be cut into by the acetylene torch of parol modification supported by adequate proof . . . The hand that pens a writing may not gag the mouths of the assenting parties.
It would appear that North Carolina would follow the standard contract principle that even a fully integrated written contract can be modified by a subsequent oral agreement.
Finding that parol evidence could be considered, Vernon Carlton Sales, Inc., makes clear that it would be the proponent of the oral agreement's burden to show its existence by clear and convincing evidence. On summary judgment, it would be the proponent's burden to come forward with colorable evidence upon which a reasonable fact finder could hold in his favor. Inasmuch as consideration will not be inferred, as it is under contracts controlled by the North Carolina Uniform Commercial Code, defendant's burden is to present evidence that the oral modification is supported by good and valuable consideration.
Defendant may contend that the consideration for this alleged agreement is his past performance under the contract. Defendant testified that Mike Zuliani told him that the debt would be forgiven because "you have earned enough to pay us back ten times over. That will be forgiven." Alternatively, defendant may be contending that it was his forbearance in not telling others in the Franklin community his real reason for leaving, but, instead, agreeing to fabricate a reason for returning to Florida.
For a contract to be enforceable in North Carolina, it must be supported by consideration. Investment Properties v. Norburn, 281 N.C. 191, 195 (1972). Consideration is some benefit or advantage to the promisor or some loss or detriment to the promisee. Helicopter Corp. v. Realty Co., 263 N.C. 139, 147 (1964). Mutual promises may constitute reciprocal consideration to support a contract. Penley v. Penley, 314 N.C. 1, 16 (1985); Allied Personnel v. Alford, 25 N.C. App. 27, 30 (1975).
[T]here is 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 (quoted with approval in Penley, supra, at 14).
In this case, "past performance" under the original contract does not constitute valid consideration under North Carolina law, as that would be a gratuitous promise. Bailey v. Rutjes, 86 N.C. 517 (1882) (a promise by lessors to pay for lumber furnished the lessee, if made after the lumber was furnished, is not binding on them, it being purely gratuitous).
The only issue left is whether defendant's forbearance in telling the medical community the true reason he was leaving is adequate consideration. In Bumgarner v. Tomblin, 63 N.C. App. 636 (1983), the North Carolina Court of Appeals held that a promisee's doing something he is not bound to do or refraining from exercising a right, suffices as consideration for a promise. Defendant testified that the promise to forbear was made in proximity to the alleged oral agreement, which suffices under North Carolina law. See Carolina Eastern, Inc. v. Benson Agri Supply, Inc., N.C. App. 180 (1984). For forbearance to constitute legal consideration, it must be based upon a promise to forbear made at the time of the parties' contract. Id.
While such forbearance would be consideration, the next issue is whether it would be lawful consideration. Plaintiff argues that an agreement to fabricate a story to hide defendant's real reason for leaving would be unenforceable as against public policy. In Lamm v. Crumpler, 233 N.C. 717 (1951), the North Carolina Supreme Court held, as follows:
Moreover, it is an established principle, universally applied in this jurisdiction to various factual situations, that an executory contract, the consideration of which is against good morals, or against public policy, or the laws of the State, or in fraud of the State, or of any third person, cannot be enforced in a court of justice.
For instance, in Blythe v. Lovinggood, supra, it is held: "The law prohibits everything which is contra bonos mores, and, therefore, no contract which originates in an act contrary to the true principles of morality can be made the subject of complaint in the courts of justice."Id., at 722 (citations omitted). While the court is cognizant of the fact that employers and employees agree all the time to fabricate reasons for a person's departure, they do not typically come to a court to seek enforcement of those agreements. Indeed, the court can find no specific North Carolina cases dealing with that particular point. North Carolina does, however, adhere to a rigid standard of "true principles of morality" when a person applies to a court to enforce a contract. Truth is certainly a principle of morality. North Carolina law appears to make no exception for small untruths as opposed to big untruths, and even though this would be the most routine deception, North Carolina courts would be compelled to avoid lending credence to any such agreement. This court, therefore, must also stay its hand and reaffirm its granting of the Motion for Summary Judgment for the reasons discussed herein and the reasons contained in the earlier filed Memorandum of Decision, as modified hereby.
Having found that defendant has not made a showing that would satisfy his burden under Rule 56 as to either estoppel or accord and satisfaction, and finding that no genuine issues of material fact remain for trial, the court hereby grants defendant's Motion for Re-Hearing (deemed to be a Motion to Reconsider). Further, the court, having conducted such reconsideration, reaffirms the earlier Memorandum of Decision, as modified by this Memorandum and Order, and reaffirms the earlier entry of judgment in favor of plaintiff.
This Memorandum and Order is entered in response to defendant's Motion for Re-Hearing (#).