## Facts

- In April 1972, Home Federal Savings and Loan Association of Hollywood (“Home Federal”) agreed with the predecessor of Landmark Hotel, Inc. (“Landmark”) to issue a long-term mortgage to fund construction of a hotel.
- A title commitment required Landmark to provide an acceptable hotel-management contract with Hyatt House Hotel Corporation; that proposed contract was not accepted.
- Landmark submitted a substitute management contract with Motor Inn Management, Inc. (“Motor Inn”), which Home Federal accepted.
- In November 1972, a broker approached Chemical Realty Corporation (“Chemical Realty”) to serve as construction lender for the hotel project.
- Chemical Realty agreed to provide construction financing on the condition that Landmark, Chemical Realty, and Home Federal sign a triparty “takeout” agreement so the permanent mortgage would pay off the construction loan.
- Chemical Realty issued a construction-loan commitment in December 1972, but the proposed triparty agreement was later removed from the commitment because it was unacceptable to the parties.
- In April 1973, Home Federal delivered an undated letter to Chemical Realty setting out terms intended to effect a takeout of Chemical Realty’s construction loan, subject to stated conditions.
- Home Federal extended its permanent-loan commitment to give Chemical Realty time to close its construction loan; Chemical Realty then closed and funded the construction loan to Landmark.
- Chemical Realty paid Home Federal a total of $90,000 in connection with extensions of the permanent-loan commitment, as contemplated by the letter.
- During construction, Landmark and Motor Inn reached an impasse; construction stopped.
- In October 1974, Chemical Realty and Home Federal met to close the long-term mortgage, but Home Federal refused to close, asserting the conditions in its commitment had not been satisfied and denying Chemical Realty’s request for an additional extension.
- Landmark later filed for bankruptcy, and Chemical Realty foreclosed under its deed of trust.
- Chemical Realty sued Home Federal for breach of contract, asserting (a) Home Federal owed Chemical Realty a direct contractual duty arising from the undated letter and related dealings, or (b) Chemical Realty could enforce Home Federal’s permanent-loan commitment as an intended third-party beneficiary.
- After a bench trial, the trial court entered judgment for Home Federal but made only a minimal “finding” about the letter—stating that Home Federal (by Wohl) executed an undated letter admitted as Defendant’s Exhibit 154—without resolving whether any contractual duty ran to Chemical Realty.

## Issues

1. Whether the trial court, sitting without a jury, failed to comply with N.C. R. Civ. P. 52(a)(1) by not making specific findings of ultimate fact and separate conclusions of law on (a) whether the undated letter and related conduct formed a contract between Chemical Realty and Home Federal, and (b) whether Chemical Realty was an intended third-party beneficiary of Home Federal’s permanent-loan commitment to Landmark.
2. Whether the trial court’s lone finding about the existence of the undated letter (Exhibit 154) was only an evidentiary fact and therefore insufficient to support the judgment or permit appellate review.

## Decision

- The North Carolina Court of Appeals reversed the judgment and remanded.
- The court held the trial court did not make the findings of ultimate fact and conclusions of law required by Rule 52(a)(1) for a nonjury trial.
- The appellate court explained that the trial court’s only finding regarding the letter merely acknowledged its execution and did not decide whether Home Federal owed any contractual duty to Chemical Realty.
- Because the order did not resolve the determinative factual questions underlying Chemical Realty’s direct-contract and third-party-beneficiary theories, the appellate court could not meaningfully review the judgment.
- On remand, the trial court was directed to enter adequate findings of fact and conclusions of law addressing the contract and third-party-beneficiary contentions.

## Legal Principles

- In a bench trial, N.C. R. Civ. P. 52(a)(1) requires the trial judge to “find the facts specially” and “state separately its conclusions of law.”
- Findings must state the ultimate facts—those determinative of the dispute and needed to support the legal conclusions—rather than listing only evidentiary details.
- Findings must be specific enough to show the basis of the decision and allow appellate review of whether the judgment follows from the facts found and the law applied.
- A finding that merely notes the existence of an exhibit or a piece of evidence, without resolving the parties’ rights and duties, is inadequate for a valid judgment in an action turning on contractual obligation.

## Conclusion

Because the trial court’s order contained only an evidentiary finding about Home Federal’s undated letter and did not determine the ultimate facts needed to decide whether Home Federal owed Chemical Realty a contractual duty (directly or as a third-party beneficiary), the Court of Appeals reversed and remanded for proper Rule 52(a)(1) findings and conclusions.


Chemical Realty Corp. v. Home Fed. S & L Assn. of Hollywood, 310 S.E.2d 33 (1983)