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holding that there is no mutual assent, and therefore no contract formed, when “in the contemplation of both parties ... something remains to be done to establish contract relations”
Summary of this case from Rose v. PottsOpinion
No. COA06-740.
Filed 20 March 2007.
Vendor and Purchaser — standard form agreement for purchase and sale of real property — signed by one of two named sellers — invalidity
A standard form agreement for the purchase and sale of real property was not a valid contract where it was signed by only one of the two named sellers, and language in the agreement providing that it "shall become an enforceable contract when a fully executed copy has been communicated to both parties" demonstrates that the parties did not intend to have a valid contract until it was signed by all parties.
Judge TYSON dissenting.
Appeal by plaintiff from order entered 20 February 2006 by Judge Larry G. Ford in Superior Court, Davidson County. Heard in the Court of Appeals 24 January 2007.
Eric C. Morgan, P.A., by Eric C. Morgan, and L.G. Gordon, Jr., P.A., by L.G. Gordon, Jr. for plaintiff-appellant. Biesecker, Tripp, Sink Fritts, L.L.P., by Joe E. Biesecker and Christopher Alan Raines, for defendant-appellee.
This is a breach of contract action concerning a standard form Agreement for Purchase and Sale of Real Property (Agreement) that is signed by only one of two named sellers. The dispositive question before this Court is whether there is a valid contract between the buyer and the signing seller. Because the Agreement expressly provides that it "shallbecome an enforceable contract when a fully executed copy has been communicated to both parties," but one party has not signed the Agreement, we conclude that there is no valid contract.
I. Background
Plaintiff Harold Parker filed a civil complaint against defendant Douglas Glosson in Superior Court, Davidson County on 4 anuary 2006. In the complaint, plaintiff alleged that defendant breached a contract to sell thirty-six acres of real property, including a truck shop, warehouse, and offices, located in Lexington, N.C. Plaintiff further alleged that he "made demand for [c]losing on the [property and offered to tender the closing price," but that defendant ignored his requests. In his prayer for relief, plaintiff sought specific performance and, alternatively, damages.
Plaintiff attached a copy of the Agreement to his complaint, labeling the document "Exhibit A." Clause thirteen of the Agreement provides: "This Agreement shall become an enforceable contract when a fully executed copy has been communicated to both parties." (Emphasis added.) Although the Agreement names Douglas Glosson and Sandy Glosson as the sellers of the disputed property, only Douglas Glosson has signed the document. Plaintiff's complaint alleged that Douglas Glosson is "the owner" of the property and the remaining allegations contained therein do not mention Sandy Glosson.
On 3 February 2006, defendant filed a motion to dismiss plaintiff's complaint for failure to state a claim upon which relief can be granted pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6). Judge Larry G. Ford heard defendant's motion on 20 February 2006, at which time defendant argued that no valid contract existed between the parties because the Agreement, on its face, shows that the parties did not intend to be bound by a contractual relationship until both sellers and the buyer signed the document. Plaintiff responded that the Agreement satisfies the statute of frauds and that there are many outstanding questions of fact concerning Sandy Glosson and her interest in the property that make dismissal improper.
On 21 February 2006, Judge Ford entered an order dismissing plaintiff's complaint. In his order, Judge Ford concluded that "the complaint fails to state a claim upon which the relief prayed in the complaint can be granted because there is no valid contract." Plaintiff appealed.
II. Standard of Review
This Court reviews dismissal of a complaint pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6), de novo. Acosta v. Byrum, 180 N.C. App. 562, 638 S.E.2d 246 (2006). "The word ` de novo' means fresh or anew; for a second time," In re Reassignment of Hayes, 261 N.C. 616, 622, 135 S.E.2d 645, 649 (1964), and an "appeal de novo" is an "appeal in which the appellate court uses the trial court's record but reviews the evidence and law without deference to the trial court's rulings," Black's Law Dictionary 94 (7th ed. 1999). Thus, we consider the parties' pleadings, together with the transcript of the parties' argument below, to determine whether defendant met the applicable burden of proof.
To prevail on a Rule 12(b)(6) motion to dismiss, the defendant must show that "as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not." Harris v. NCNB Nat'l Bank, 85 N.C. App. 669, 670, 355 S.E.2d 838, 840 (1987). The complaint must "allege[] the substantive elements of a legally recognized claim" and must "give sufficient notice of the events which produced the claim to enable the adverse party to prepare for trial." People's Sec. Life Ins. Co. v. Hooks, 322 N.C. 216, 218, 367 S.E.2d 647, 648-49 (1988). If a complaint "discloses] . . . [a] fact which will necessarily defeat" the plaintiff's claim, then it will be dismissed. Forbis v. Honeycutt, 301 N.C. 699, 701, 273 S.E.2d 240, 241 (1980). "Documents attached as exhibits to the complaint and incorporated therein by reference are properly considered when ruling on a 12(b)(6) motion." Woolard v. Davenport, 166 N.C. App. 129, 133-34, 601 S.E.2d 319, 322 (2004).
III. Contract Formation
"The elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract." Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000). No contract is formed without an agreement to which at least two parties manifest an intent to be bound. Croom v. Goldsboro Lumber Co., Inc., 182 N.C. 217, 220, 108 S.E. 735, 737 (1921) (mutual assent is an "essential element" of every contract); see also Kirby v. Stokes Cty. Bd. of Educ., 230 N.C. 619, 626, 55 S.E.2d 322, 327 (1949) ("A contract is an agreement between two or more persons or parties [based] on sufficient consideration to do or refrain from doing a particular act."). In law, this agreement is commonly called mutual assent and is customarily described as a "meeting of the minds." See Charles Holmes Mach. Co. v. Chalkley, 143 N.C. 181, 183, 55 S.E. 524, 525 (1906) ("The first and most essential element of an agreement is the consent of the parties, an aggregatio mentium, or meeting of two minds in one and the same intention, and until the moment arrives when the minds of the parties are thus drawn together, the contract is not complete, so as to be legally enforceable.").
There is no meeting of the minds, and, therefore, no contract, when "in the contemplation of both parties . . . something remains to be done to establish contract relations." Fed. Reserve Bank v. Neuse Mfg. Co. Inc., 213 N.C. 489, 493, 196 S.E. 848, 850 (1938). This rule has been described as "too well established to require the citation of authority." Id. Thus, if negotiating parties impose a condition precedent on the effectiveness of their agreement, no contract is formed until the condition is met. Likewise, when negotiating parties make it clear that they do not intend to be bound by a contract until a formal written agreement is executed, no contract exists until that time. Hilliard v. Thompson, 81 N.C. App. 404, 409, 344 S.E.2d 589, 592 (1986) (Whichard, J., concurring and stating the majority holding) (concluding because "[t]he uncontroverted forecast of evidence . . . establishes that defendant manifested an intent that the alleged agreement was not to be binding unless his wife became a party by agreeing to it, and that his wife refused to sign and become a party. . . . I would hold that the plaintiffs cannot enforce the alleged agreement"); see also Burgin v. Owen, 181 N.C. App. 511, ___ S.E.2d ___ (filed Feb. 6, 2007) (affirming the trial court order which granted the defendant's Rule 12(b)(6) motion to dismiss plaintiff's complaint alleging breach of contract and specific performance because (1) N.C. Gen. Stat. § 39-13.6(a) (2005) provides that a husband may not convey real property held as tenancy by the entirety without his wife's signature, and (2) the defendant's wife did not sign the Offer to Purchase and Contract).
Although Judge Whichard's opinion in Hilliard is titled as a "concurring opinion," Judge Johnson joined in Judge Whichard's concurrence. 81 N.C. App. at 404, 344 S.E.2d at 589. Therefore, the majority holding is actually contained in Judge Whichard's "concurrence." See, e.g., Maraman v. Cooper Steel Fabricators, 355 N.C. 482, 483, 562 S.E.2d 420, 421 (2002) (affirming the Court of Appeals' opinion in part and reversing the Court of Appeals' opinion in part because "a portion of the majority opinion was erroneously designated a dissent, while a portion of the dissent was found in what purported to be the majority opinion"); Jones v. Asheville Radiological Group, P.A., 350 N.C. 654, 655, 517 S.E.2d 380, 380 (1999) (remanding for modification of the Court of Appeals' opinion because "the majority holding is found within an opinion authored by Judge Green titled `concurrence and dissent"); Knight Pub. Co., Inc. v. Chase Manhattan Bank, N.A., 351 N.C. 98, 98, 530 S.E.2d 54, 54 (1999) (remanding for modification of the Court of Appeals' opinion because the "majority holding . . . is found in Judge Walker's concurring in part and dissenting in part opinion").
Here, clause 13 of the Agreement for Purchase and Sale of Real Property [the Agreement] expressly provides "[t]his [agreement shall become an enforceable contract when a fully executed copy has been communicated to both parties." (Emphasis added.) From this language, we conclude that the sellers did not intend to sell, and the buyer did not intend to buy, until the Agreement was signed by all parties. The parties identified as "Seller[s]" at the top of the first page of the Agreement are Douglas Glosson and Sandy Glosson; however, only Douglas Glosson has signed on the "Seller" signature lines at the end of the Agreement. Because Sandy Glosson has not signed the Agreement, the Agreement is not "fully executed" and, therefore, no contract has been formed between the parties as a matter of law.
No party is identified as the Buyer. An illegible signature, alleged to be the signature of Harold Parker, is written on the "Buyer" signature line at the end of the document.
The reason for holding the instrument void is that it was intended that all the parties should execute it and that each executes it on the implied condition that it is to be executed by the others, and, therefore, that until executed by all it is inchoate and incomplete and never takes effect as a valid contract, and this is especially true where the agreement expressly provides or its manifest intent is. that it is not to be binding until signed.
Hilliard, 81 N.C. App. at 409, 344 S.E.2d at 591 (Whichard, J. concurring) (internal quotation omitted) (emphasis added).
In reaching this result, we take the word "execute" to mean "sign," which is a familiar usage of this term at law and which is the apparent meaning of the term in context. See Black's Law Dictionary 589 (7th ed. 1999) (defining "execute" as a verb which means "[t]o make [a legal document] valid by signing"); Harris v. Latta, 298 N.C. 555, 558, 259 S.E.2d 239, 241 (1979) ("In construing contracts ordinary words are given their ordinary meaning unless it is apparent that the words were used in a special sense."). For example, in Hilliard v. Thompson, this Court repeatedly used the term "execute" to refer to the "signing" of a real estate contract. 81 N.C. App. at 408-09, 344 S.E.2d at 591-92.
Although we agree with plaintiff that a contract to sell or convey an interest in real property is enforceable if the essential terms of the parties' agreement are evidenced in writing and that writing is "signed by the party to be charged," see N.C. Gen. Stat. § 22-2 (2005) (contracts concerning interests in real property must be in writing); Durham Consol. Land Improvement Co. v. Guthrie, 116 N.C. 381, 384, 21 S.E. 952, 953 (1895) (explaining "that if A contracts in writing to sell a tract of land to B, whose promise to pay is not in writing, A would be bound to perform, but B would not, if he saw proper to avail himself of the statute [of frauds]"), the issue sub judice is one of contract formation, not contract enforceability. Although plaintiff asserts that there are outstanding questions of fact concerning Sandy Glosson's identity and interest in the disputed property, plaintiff can "prove no set of facts in support of his claim which would entitle him to relief." Dixon v. Stuart, 85 N.C. App. 338, 340, 354 S.E.2d 757, 758 (1987). The complaint "disclos[es] . . . [a] fact which will necessarily defeat" plaintiffs claim for breach of contract. Forbis v. Honeycutt, 301 N.C. 699, 701, 273 S.E.2d 240, 241 (1981). The dispositive fact is that Sandy Glosson has not executed the Agreement.
IV. Conclusion
For the reasons stated above, we affirm the trial court order granting defendant's motion to dismiss pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6).
AFFIRMED.
Judge STEPHENS concurs.
Judge TYSON dissents by separate opinion.