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Myers & Chapman, Inc. v. Thomas G. Evans, Inc. - 323 N.C. 559, 374 S.E.2d 385 (1988)

Rule:

While fraud has no all-embracing definition and is better left undefined lest crafty men find a way of committing fraud which avoids the definition, the following essential elements of actionable fraud are well established: (1) false representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive (4) which does in fact deceive, (5) resulting in damage to the injured party.

Facts:

Plaintiff general contractor Myers & Chapman, Inc. entered into a written subcontract with corporate defendant Thomas G. Evans, Inc. (“Evans”). Myers & Chapman  submitted applications for payment, which were signed and notarized by individual defendant Brenda Evans, for equipment that later went missing and had to be paid for again by Myers & Chapman, who then sought to recover its loss. The trial court found that the applications were fraudulent and that individual defendants Thomas Evans and his wife, Brenda, who were the sole directors and officers of defendant Evans, Inc. were grossly negligent. The appeals court reversed the intentional fraud finding and held that the language in the applications did not constitute a representation. A new trial was granted on the gross negligence claim because the jury instruction was erroneous.

Issue:

Where a corporate defendant's payment application to plaintiff general contractor was signed by an individual defendant, did this gross negligence constitute a fraud?

Answer:

No

Conclusion:

The Supreme Court of North Carolina affirmed in part, but for different reasons, reversed in part, and remanded. The Court found that the applications did constitute representations but that there was no evidence of fraud because the representations were not based on personal knowledge that they were false. The same evidence was sufficient, however, to submit the gross negligence issue to the jury. The Court also affirmed that the trial court's jury instruction as to whether the principals acted with such gross negligence as to permit a fraud was erroneous. The judgment against defendant Brenda Evans was vacated because she acted only as a notary.

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