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An  unpublished  opinion  of  the  North  Carolina  Court  of  Appeals  does  not  constitute
controlling legal  authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule  30(e)(3) of the  North Carolina Rules of Appellate Procedure.
NO. COA10-1443
NORTH CAROLINA COURT OF APPEALS
Filed:  19 July  2011
MERRILL LYNCH COMMERICIAL FINANCE
CORP.,
Plaintiff-Appellee,
v.                                                                                              Forsyth County
No.  09 CVS  3257
RUSH INDUSTRIES, INC. and MICHAEL
S. RUSH,
Defendants-Appellants.
Appeal  by  Defendants  from  order  entered                                                    24  May                                           2010  by
Judge  Catherine  C.  Eagles  in  Superior  Court,  Forsyth  County.
Heard in the Court of Appeals  12 April  2011.
Bell,  Davis  &  Pitt,  P.A.,  by  Stephen  D.  Poe,  Alan  M.  Ruley,
and Colleen L. Byers, for Plaintiff-Appellee.
J. Brooks Reitzel, Jr. for Defendants-Appellants.
McGEE, Judge.
Michael   S.   Rush                                                                             (Mr.   Rush)   is   the   president   of   Rush
Industries,  Inc.  (Rush  Industries)  (together,  Defendants).    Rush
Industries  is  a  corporation  with  its  principal  place  of  business
in High Point, North Carolina.
Rush  Industries  entered  into  a  Working  Capital  Management




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Account   Note,   Loan   and   Security   Agreement                           (the   loan)   with
Merrill  Lynch  Business  Financial  Services,  Inc.  on  6  April  1995.
Merrill   Lynch   Commercial   Finance   Corp.                                (Plaintiff)   is   the
successor   in   interest   to   Merrill   Lynch   Business   Financial
Services,  Inc.     The  loan  included  an  integration  clause  under
section  10(m) that stated:
THIS   LOAN   AGREEMENT,   TOGETHER   WITH   THE
ADDITIONAL    AGREEMENTS,    CONSTITUTES    THE
ENTIRE  UNDERSTANDING  AND  REPRESENTS  THE  FULL
AND  FINAL  AGREEMENT  BETWEEN  THE  PARTIES  WITH
RESPECT  TO  THE  SUBJECT  MATTER  HEREOF,  AND
MAY  NOT  BE  CONTRADICTED  BY  EVIDENCE  OF  PRIOR
WRITTEN  AGREEMENTS  OR  PRIOR,  CONTEMPORANEOUS
OR    SUBSEQUENT    ORAL    AGREEMENTS    OF    THE
PARTIES.                                                                      THERE   ARE   NO   UNWRITTEN   ORAL
AGREEMENTS OF THE PARTIES.
Mr.  Rush  also  entered  into  an  Unconditional  Guaranty  Agreement
on  6  April  1995,  which  guaranteed  payment  in  full  on  all  amounts
due  under  the  loan.     Plaintiff  admits  that  the  loan  was  to
extend  a  revolving  line  of  credit  to  Rush  Industries  in  the
original   maximum   amount   of                                              $300,000.00,   with   an   original
maturity  date  of  30  April  1996.    The  maturity  date  was  extended
and  the  line  of  credit  was  increased  from  time  to  time,  in
writing,  as  the  parties  agreed.    The  final  amendment  of  the  loan
increased  the  maximum  principal  amount  to                                $600,000.00  and  the
final extension extended the maturity date to  31 March  2009.
Defendants  received  a  written  Notice  of  Default  and  Demand
for  Payment                                                                  (the  notice),  dated                 17  April   2009,  indicating  that




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the  loan  had  expired  on  31  March  2009  and  would  not  be  renewed.
The  notice  stated  that  payment  of  the  loan  was  due  in  full
immediately  and  that  the  loan  went  into  default  on  9  April  2009.
The   notice   further   indicated   that   the   total   sum   owed   was
"$620,082.93                                                                  (reflecting                                                (i)   $589,211.45   in   principal,   (ii)
                                                                              $1,563.11  in  accrued  and  unpaid  interest  and               (iii)                           $29,308.37
late charge)[.]"
                                                                              Plaintiff   filed   a   complaint   on                           23   April                      2009   seeking
                                                                              judgment   against   Defendants   in   the   amount   of                                         $620,082.93.
Plaintiff  also  alleged  that  interest  would  continue  to  accrue
until  judgment  was  entered,  and  further  requested  attorneys'
fees and post-judgment interest as allowed by law.
Defendants  filed  an  answer  and  counterclaim  on                          10  July
2009,  asserting  a  number  of  defenses  to  Plaintiff's  claims  but
did  not  include  a  defense  of  fraud,  duress,  or  breach  of  the
covenant  of  good  and  fair  dealing.     Defendants'  counterclaim
alleged  that  during  the  course  of  dealings  between  Plaintiff  and
Defendants,   the   parties   had   entered   into   several   oral
understandings    and    agreements,    along    with    the    written
agreements.    Defendants  alleged  that  the  termination  of  the  loan
breached  those  agreements,  both  oral  and  written,  and  caused
damage   to   Defendants.                                                     Defendants   asked   that   Plaintiff's
complaint  be  dismissed,  that  Plaintiff  recover  nothing  from




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Defendants,  and  that  Defendants  receive  compensatory  damages  in
excess of  $10,000.00.
Plaintiff  filed  a  motion  for  summary  judgment  on                      30  April
2010,  contending  there  was  no  genuine  issue  of  material  fact  and
that  Plaintiff  was  entitled  to  summary  judgment  as  a  matter  of
law  on  its  claims  and  Defendants'  counterclaims.                       Plaintiff
sought  recovery  from  Defendants  in  the  amount  of  $745,404.94,  as
of  28 April  2010.
Defendants  filed  a  response  and  affidavit  in  opposition  to
Plaintiff's  motion  for  summary  judgment  on  18  May  2010,  alleging
the  breach  of  oral  agreements  between  Plaintiff  and  Defendants.
Defendants  argued  that  there  were  genuine  issues  of  material
fact  to  be  determined  and  that  they  should  not  be  determined  by
summary judgment.
The   trial   court   entered   an   order   granting   Plaintiff's
motion  for  summary  judgment  on                                           24  May                                      2010.   The  order  also
dismissed    Defendants'    counterclaim    and    awarded    Plaintiff
$659,411.65,  plus  the  costs  of  the  action,  including  attorneys'
fees  in  the  amount  of                                                    $88,616.18,  and  post-judgment  interest.
Defendants appeal.
Defendants'  sole  argument  on  appeal  is  that  the  trial  court
erred  in  granting  summary  judgment  in  favor  of  Plaintiff  because
genuine  issues  of  material  fact  remain  in  dispute.    Defendants




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contend  that  the  written  agreements  between  the  parties  were
modified  over  time  by  oral  agreements  and  that  Plaintiff  engaged
in  fraud,  duress,  and  breach  of  the  covenant  of  good  and  fair
dealings.    We disagree.
"The  standard  of  review  for  summary  judgment  is  de  novo."
Forbis  v.  Neal,                                                             361  N.C.                       519,              524,   649  S.E.2d                             382,     385                              (2007)
(citation  omitted).     "Summary  judgment  is  appropriate  if  'the
pleadings,    depositions,    answers    to    interrogatories,    and
admissions  on  file,  together  with  the  affidavits,  if  any,  show
that  there  is  no  genuine  issue  as  to  any  material  fact  and  that
any  party  is  entitled  to  a  judgment  as  a  matter  of  law.'"    Id.
at                                                                            523-24,                         649  S.E.2d  at   385    (citation  omitted).     "The  movant
has  the  burden  of  showing  that  summary  judgment  is  appropriate."
Leake  v.  Sunbelt  Ltd.  of  Raleigh,                                        93  N.C.  App.                  199,              201,   377
S.E.2d  285,  287  (1989)  (citation  omitted).    "The  movant  may  meet
this  burden  by  proving  that  an  essential  element  of  the  opposing
party's  claim  is  nonexistent,  or                                          .  that  the  opposing  party
cannot  produce  evidence  to  support  an  essential  element  of  his
claim  or  cannot  surmount  an  affirmative  defense  which  would  bar
the  claim."    Collingwood  v.  G.E.  Real  Estate  Equities,  324  N.C.
63,                                                                           66,                             376  S.E.2d       425,   427                                     (1989)   (citation  omitted).     "Once
the  party  seeking  summary  judgment  makes  the  required  showing,
the  burden  shifts  to  the  nonmoving  party  to  produce  a  forecast




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of   evidence   demonstrating   specific   facts,   as   opposed   to
allegations,  showing  that  he  can  at  least  establish  a  prima
facie  case  at  trial."    Smith  v.  Blythe  Dev.  Co.,  192  N.C.  App.
219,  221-22,  665  S.E.2d  154,  155  (2008)  aff'd,  363  N.C.  119,  678
S.E.2d  657  (2009)  (citation omitted).
Thus,  "[a]s  a  general  rule,  upon  a  motion
for                                                                           summary                   judgment,                                supported   by
affidavits,  'an  adverse  party  may  not  rest
upon  the  mere  allegations  or  denials  of  his
pleading,  but  his  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  he  does  not  so
respond,  summary  judgment,  if  appropriate,
shall be entered against him.'"
                                                                                                        Pacheco  v.  Rogers  &  Breece,  Inc.,               157  N.C.  App.                              445,   448,   579
S.E.2d                                                                        505,                      507                                      (2003)      (citation  omitted).     "Furthermore,  in
considering  summary  judgment  motions,  we  review  the  record  in
the  light  most  favorable  to  the  nonmovant."    Leake,  93  N.C.  App.
at  201,  377 S.E.2d at  287.
Defendants  argue  that  the  written  agreements  between  the
parties  were  modified  through  the  course  of  conduct  by  numerous
oral  agreements  and  understandings  and  that  Plaintiff  breached
those  oral  agreements.    Defendants  contend  that  Plaintiff's  own
exhibits  serve  as  "credible  evidence  of  oral  modifications  of
the agreements[.]"
Defendants  also  argue  that  "testimony  and  email,  together
with  the  evidence  of  representations  by                                  [a  vice  president  of




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Plaintiff].                                                                   .   supports   a   reasonable   inference   of   fraud,
duress,  breach  of  the  covenant  of  good  and  fair  dealing,  or
other  'plan  of  deception'  by                                              [Plaintiff],  sufficient  to  defeat
summary  judgment."     These  defenses  were  not  pleaded  or  argued
before  the  trial  court,  and  Defendants  argue  these  affirmative
defenses for the first time before our Court.
Defendants  cite  Bank  v.  Gillespie,  291  N.C.  303,  230  S.E.2d
375  (1976),  Miller  Building  Corp.  v.  Bell,  94  N.C.  App.  213,  379
S.E.2d                                                                        695                                                                                                           (1989),  and  Chrysler  Credit  Corp.  v.  Belk,                              56  N.C.
App.                                                                          86,                                                       286  S.E.2d                                         886                                                                           (1982),  in  support  of  their  argument
"that  unpleaded  defenses,  when  raised  by  the  evidence,  should  be
considered   in   resolving   a   motion   for   summary   judgment."
Gillespie,  291  N.C.  at  306,  230  S.E.2d  at  377.    These  cases  are
distinguishable  from  the  case  before  us.     In  the  three  cases
cited   by   Defendants,   the   non-movant   had   presented,   or   had
attempted  to  present,  the  unpleaded  affirmative  defense  to  the
trial court before entry of summary judgment.
"Pursuant  to  the  North  Carolina  Rules  of  Civil  Procedure,  a
party  shall  affirmatively  set  forth  any  matter  constituting  an
                                                                                                                                        avoidance  or  affirmative  defense.     N.C.G.S.                                                                                 §                                           1A-1,  Rule              8(c)
                                                                                                                                                                                            (1990)."    Robinson  v.  Powell,  348  N.C.  562,  566,  500  S.E.2d  714,
717                                                                                                                                                                                         (1998);  see  also  County  of  Rutherford  ex  rel.  Hedrick  v.
Whitener,                                                                     100  N.C.  App.                                           70,                                                 394  S.E.2d                                                                   263                                         (1990).     N.C.  Gen.




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Stat.  §  1A-1,  Rule  8  (2009)  lists  fraud,  duress,  "and  any  other
matter  constituting  an  avoidance  or  affirmative  defense[]"  as
defenses  among  those  that  must  be  affirmatively  plead.    "Failure
to  raise  an  affirmative  defense  in  the  pleadings  generally
results  in  a  waiver  thereof."     Robinson,                              348  N.C.  at                              566,   500
S.E.2d at  717.    In Robinson, our Supreme Court stated:
Under  certain  circumstances  this  Court  has
permitted  affirmative  defenses  to  be  raised
for  the  first  time  by  a  motion  for  summary
judgment.  .  .                                                              .     This  Court  further  stated
that
if  an  affirmative  defense  required
to   be   raised   by   a   responsive
pleading  is  sought  to  be  raised
for  the  first  time  in  a  motion  for
summary  judgment,  the  motion  must
ordinarily  refer  expressly  to  the
affirmative   defense   relied   upon.
Only  in  exceptional  circumstances
where    the    party    opposing    the
motion  has  not  been  surprised  and
has  had  full  opportunity  to  argue
and  present  evidence  will  movant's
failure  expressly  to  refer  to  the
affirmative  defense  not  be  a  bar
to   its   consideration   on   summary
judgment.
[Dickens  v.  Puryear,                                                       302  N.C.                                  437,   443,   276
S.E.2d  325,  329];  see  also  Miller  v.  Talton,
112  N.C.  App.  484,  487,  435  S.E.2d  793,  796
(1993)                                                                       (holding  that  in  the  absence  of  an
express  reference  to  the  affirmative  defense
in   the   motion   for   summary   judgment,   the
trial  court  may  still  grant  the  motion  on
that  ground  if  the  affirmative  defense  was
clearly  before  the  court).     Defendant  not
having  pled  the  affirmative  defense  .  .  . in
either  his  answer  or  his  motion  for  summary




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judgment,  the  issue  of                                                                                                                         [the  unpled  defense]
                                                                            was  not  before  the  trial  court.     In  fact,
                                                                            the  Court  of  Appeals  sua  sponte  raised  the
issue  on  appeal.                                                          Defendant's  failure  to
assert                                                                      [the]  affirmative  defense  bars  that
issue  being  raised  by  him,  or  by  the  Court
of Appeals, on appeal.
Id. at  566-67,  500 S.E.2d at  717.
Defendants  failed  to  raise  the  affirmative  defenses  of
fraud,  duress,  or  breach  of  the  covenant  of  good  and  fair
dealing  in  their  pleadings;  nor  did  they  argue  them  before  the
trial  court.                                                               Defendants'  attempt  to  raise  these  potential
defenses  for  the  first  time  on  appeal  fails  and  Defendants  have
waived their right to argue these affirmative defenses.    Id.
Because  Defendants  have  waived  any  right  to  argue  fraud,
their   argument   regarding   the   inapplicability   of   the   merger
clause  fails  as  well.     Defendants  contend  that  "inferences  of
fraud"  in  the  record  were  enough  to  create  an  exception  to  the
parol  evidence  rule  and  render  the  merger  clause  unenforceable,
thereby  allowing  the  alleged  oral  agreements  to  be  admissible  as
evidence  of  modification  of  the  loan.    Our  Court  has  held  that
"[t]he  parol  evidence  rule  prohibits  the  admission  of  parol
evidence  to  vary,  add  to,  or  contradict  a  written  instrument
intended  to  be  the  final  integration  of  the  transaction."    Hall
v.  Hotel  L'Europe,  Inc.,                                                 69  N.C.  App.                                                        664,                     666,   318  S.E.2d   99,
101                                                                         (1984).    Defendants  claim  exception  on  the  basis  of  fraud.




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                                                                             Fox  v.  Southern  Appliances,   264  N.C.   267,                                                     270,   141  S.E.2d   522,
525                                                                          (1965).                                      Defendants   argue   that   the   merger   clause   is
inapplicable  because  "giving  effect  to  the  merger  clause  would
frustrate   and   distort   the   parties'   true   intentions   and
understanding  regarding  the  contract[.]"     Zinn  v.  Walker,            87
N.C. App.  325,  333,  361 S.E.2d  314,  318  (1987).
Our   Court   has   held   that   "[m]erger   clauses   create   a
rebuttable  presumption  that  the  writing  represents  the  final
agreement   between   the   parties.                                         Generally,   in   order   to
effectively  rebut  the  presumption,  the  claimant  must  establish
the  existence  of  fraud,  bad  faith,  unconscionability,  negligent
omission  or  mistake  in  fact."    Id.    Because  we  have  held  that
Defendants   waived   any   defense   based   on   Plaintiff's   alleged
fraud,  Defendants  are  precluded  from  arguing  on  appeal  that
fraud  serves  as  a  basis  to  invalidate  the  merger  clause  in  this
case.     The  merger  clause  is  enforceable  and  it  clearly  states
that  the  written  agreement  is  the  "full  and  final  agreement
between   the   parties"   and   that   the   agreement   "may   not   be
contradicted   by   evidence   of  .  .  .   prior,   contemporaneous   or
subsequent   oral   agreements   of   the   parties.                         There   are   no
unwritten  oral  agreements  of  the  parties."                              (Emphasis  omitted).
Any   oral   agreements   between   Defendants   and   Plaintiff   were
properly disregarded by the trial court.




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Defendants   did   not   "produce   a   forecast   of   evidence
demonstrating  specific  facts,  as  opposed  to  allegations,  showing
that  [they]  can  at  least  establish  a  prima  facie  case  at  trial."
Smith,                                                                        192  N.C.  App.  at                    221-22,   665  S.E.2d  at   155.    Defendants
failed  to  show  that  there  was  a  genuine  issue  of  material  fact
before  the  trial  court.                                                    The  trial  court  properly  entered
summary   judgment   for   Plaintiff   and   dismissed   Defendants'
counterclaims.
Affirmed.
Judges STROUD and BEASLEY concur.
Report per Rule  30(e).

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