McCullough v. Scott

• Decision Date: 30 November 1921
• Docket Number: 443.
• Parties: MCCULLOUGH v. SCOTT ET AL., STATE BOARD OF ACCOUNTANCY.
• Court: North Carolina Supreme Court

109 S.E. 789

182 N.C. 865

MCCULLOUGH v. SCOTT ET AL., STATE BOARD OF ACCOUNTANCY.

No. 443.

Supreme Court of North Carolina

November 30, 1921

Appeal from Superior Court, Mecklenburg County; Ray, Judge.

Action by D. H. McCullough against George G. Scott and others constituting the State Board of Accountancy. Judgment for defendants, and plaintiff appeals. The Attorney General was made a party plaintiff in the Appellate Court. Reversed.

Where ordinary interpretation leads to consequences so dangerous and absurd that they could never have been intended, the court may adopt a construction from analogous provisions and thus supply an omission.

This action was brought by the plaintiff, who is a duly certified public accountant, to enjoin the defendants from exercising certain of their duties beyond the limits of the state, and to be more exact, from examining applicants for licenses and certificates to practice, as public accountants, beyond the state and in the city of Washington, D. C.

The case was tried below on demurrer to the complaint and the motion to vacate a restraining order theretofore granted. The court sustained the demurrer and vacated the restraining order, and refused a preliminary injunction to the final hearing. Plaintiff appealed.

Cochran & Beam and Carrie L. McLean, all of Charlotte, for appellant.

E. R Preston, of Charlotte, and James A. Lockhart, of Wadesboro, for appellees.

WALKER, J. (after stating the facts as above).

The State Board of Accountancy was created by a special act of the Legislature of 1913, the act being chapter 157 of the Public Laws of 1913, brought forward in the Consolidated Statutes as chapter 116, §§ 7008 to 7024, inclusive. The function of this Board is to examine applicants and grant certificates, as certified public accountants of the state of North Carolina, to those giving evidence by such examination that they are qualified. The statute provides (C. S. 7010) that--

"The Board shall determine the qualifications of persons applying for certificates under this chapter, and make rules for the examination of applicants and the issue of certificates herein provided."

The statute further provides (C. S. 7016):

"The examination shall be held as often as may be necessary in the opinion of the Board, and at such times and places as it may designate, but not less frequently than in each calendar year."

Before entering upon a discussion of the merits, we will first consider a preliminary question based upon the motion of the plaintiff in this court to make the Attorney General a party as coplaintiff, so that the title of the case shall be "The State, on the Relation of the Attorney General and D. H. McCullough," as plaintiffs, against the present defendants. The defendants resist the granting of this motion on the ground that the amendment here will deprive them of the benefit of their second ground of demurrer taken below, that plaintiff had no right to bring this action, and that this court will not allow an amendment, when such a result will follow. This is true generally, as the cases cited by the defendants show. West v. Railway, 140 N.C. 620, 53 S.E. 477, 6 Ann. Cas. 360; Bonner v. Stotesbury, 139 N.C. 3, 51 S.E. 781; Wilson v. Pearson, 102 N.C. 290, 9 S.E. 707; Grant v. Rogers, 94 N.C. 755. And they further contend that it would substitute a new cause of action. If we could see that such would be the result, and that defendants would be prejudiced thereby, we might deny the motion; but it does not so appear to us. The plaintiff has some interest in the cause of action, as a member of the class for whose benefit this law was enacted, and is subject to the general supervision of its Board and its official bodies, and also he has such interest as a citizen and taxpayer, in seeing that funds, in which the public have an interest, should not be diverted to an illegal purpose or squandered for unauthorized purposes, and more especially he has an interest in requiring that funds raised for the support of this quasi public body, they being trustees of the class of which he is a member, should not be unlawfully expended by the Board, but should be held by it to subserve the special objects for which it was created.

But, however this may be, and it is not necessary that we should definitely decide it, this court has allowed the amendments requested, which are in the interest of a hearing of the case upon its real merits, and in accordance with, at least, one of our former decisions, when a similar amendment was ordered here. Forte v. Boone, 114 N.C. 176, 19 S.E. 632 (op. by the present Chief Justice). There it was held, as the syllabus of the case shows, that where an action was brought on the official bond of a clerk of the superior court in the name of the parties injured by a breach thereof, it was not error in the court below to permit an amendment of the summons by the insertion of the words "The State on Relation of" after the pleadings were filed. The court, in the opinion, says with respect to this holding:

"We may note, however, that the exception that the judge allowed the summons to be amended by adding the words 'State on Relation of' before the name of plaintiff was not error. Maggett v. Roberts, 108 N.C. 174. It might have even been allowed after verdict (Brown v. Mitchell, 102 N.C. 347), or, indeed, in this court"--citing Hodge v. Railroad, 108 N.C. 24, 26, 12 S.E. 1041; Grant v. Rogers, 94 N.C. 755; Tyrrel v. Simmons, 48 N.C. 187; Code, § 965.

We then have a case in the name of the state, upon the relation of its Attorney General and D. H. McCullough, against the defendants, to enjoin the violation by the latter of the law creating them, wherein it is alleged that they have committed an ultra vires act, and to the extent that, if they may pay their expenses in the doing of the alleged unlawful act, they will misapply the trust fund established by the statute for the lawful costs and expenses of the Board, and thereby are diminishing the amount which should go into the public treasury by the terms of the law, which provides in Consol. Statutes, § 7019, that after paying expenses, "any surplus arising shall, at the end of each year, be deposited by the treasurer of the Board with the state treasurer to the credit of the general fund." The Consol. Statutes, § 1143, entitled "Actions by the Attorney General to Prevent Ultra Vires Acts" by corporations, provides:

"In the following cases the Attorney General may, in the name of the state, upon his own information, or upon the complaint of a private party, bring an action against the offending parties for the purpose of--

1. Restraining by injunction a corporation from assuming or exercising any franchise or transacting any business not allowed by its charter.

2. Restraining any person from exercising corporate franchises not granted.

3. Bringing directors, managers, and officers of a corporation, or the trustees of funds given for a public or charitable purpose, to an account for the management and disposition of the property confided to their care.

4. Removing such officers or trustees upon proof of gross misconduct.

5. Securing, for the benefit of all interested, the said property or funds.

6. Setting aside and restraining improper alienations of the said property or funds.

7. Generally compelling the faithful performance of duty and preventing all fraudulent practices, embezzlement, and waste."

--to restrain corporations from ultra vires acts, and which was applicable where purpose was not to disolve corporation, as under section 1187, but to preserve it in its useful functions without abuse of powers. Atty. Gen. v. R. R., 28 N.C. 456. This section embodies provisions of Rev. Code, c. 26, § 28; Rev. Statutes, c. 26, § 10; Acts of 1831, c. 24, § 5--which authorized injunction proceedings in a court of equity.

The authority, given by statute, as approved by this court, would seem to be ample justification for granting the relief prayed for by plaintiff in this action. The Attorney General is doing only what the statute permits him to do in the interest of the public, of his own motion, or upon the complaint of a private party.

Having disposed of this preliminary question, we proceed to consider the case upon its merits. It must be steadily kept in mind that we are now dealing with an overruled demurrer, and we can consider only the facts alleged in the complaint (which are to be taken as admitted), and no extraneous matter. Hartsfield v. Bryan, 177 N.C. 166, 98 S.E. 379; Brewer v. Wynne, 154 N.C. 467, 70 S.E. 947; Wood v. Kincaid, 144 N.C. 393, 57 S.E. 4.

We are firmly convinced that the statute, under which the defendants professed to hold this examination, does not authorize them to perform their duties, and exercise their functions outside the state, and that, on the contrary, it requires them to confine their activities strictly within its limits. We do not suppose, for an instant, it will be controverted that defendants are public officers. The Board created by the act is, at least, a quasi public corporation, required to discharge certain public duties and responsibilities to the state and bound for their proper and legal performance, and also for the care and administration of the funds they handle, the surplus of which, not used for defraying the Board's expenses, being required to be deposited in the state treasury. In Groves v. Barden, 169 N.C. 8, 84 S.E. 1042, L. R. A. 1917A, 228, Ann. Cas. 1917B, 316, our court defines the word "officers," and refers with approval to the case of Attorney General v. Tillinghast, 17 Ann. Cas. 452. These cases, with the authorities therein collected, and the later authorities given in the notes to Groves v. Barden (169 N.C. 8, 84 S.E. 1042, L....