Anderson Cotton Mills v. Royal Mfg. Co.
| Decision Date | 27 November 1940 |
| Docket Number | 537. |
| Citation | 11 S.E.2d 550,218 N.C. 560 |
| Parties | ANDERSON COTTON MILLS v. ROYAL MFG. CO. et al. |
| Court | North Carolina Supreme Court |
Civil action to recover damages for breach of trust and fraud.
The complaint in substance alleges:
1. That the plaintiff is engaged in the manufacture of cotton goods and a valuable by-product known as "waste".
2. That Ira A. Stone was a stockholder, director, vice-president and manager of the Charlotte office of the corporate defendant from 1928 to the Spring of 1936; that W. G Ackerman was manager of the Charlotte office of the corporate defendant from June, 1936 to the end of January, 1939; that both were connected with the actual conduct and management of the corporate defendant's business, and that they both "actually caused and participated in the wrongful acts" of the corporate defendant hereinafter alleged.
3. That the defendant corporation, through its agents represented to plaintiff that it was an expert in the marketing and handling of "waste" by virtue of its size, experience, etc., and offered to act as agent of plaintiff in disposing of plaintiff's entire output of waste.
4. That the corporate defendant tendered plaintiff a written contract in 1931, which was not accepted, but was again renewed, through its agents, and accepted and renewed each year from 1933 to 1937.
5. That during the years from 1933 to 1937 the corporate defendant fraudulently represented to the plaintiff that it was selling plaintiff's "waste" to domestic customers and exporters, and retained commissions on said alleged sales (the alleged transactions being set out in detail), when in truth and in fact no such sales were made the defendant itself being the purchaser, at less than market prices; that shipments were directed to be sent to these "dummy purchasers" in order to deceive the plaintiff, which they did, and that the defendant thus speculated in plaintiff's by-product to its great profit and advantage and to the plaintiff's great loss, etc.
The defendants moved to strike from the complaint all allegations relative to the preliminary negotiations prior to the execution of the contract of agency between plaintiff and defendant. Motion denied; exception.
The individual defendants, Ira A. Stone and W. G. Ackerman, interposed demurrer on the ground that the complaint does not state facts sufficient to constitute a cause of action against them. Demurrer overruled; exception.
Defendants appeal, assigning errors.
Stewart & Moore and Whitlock, Dockery & Shaw, all of Charlotte, for appellants.
Jones & Burwell, of Charlotte, for appellee.
As the preliminary representations constitute a part of the alleged fraud, the motion to strike was properly denied. Virginia Trust Co. v. Dunlop, 214 N.C. 196, 198 S.E. 645; Hildebrand v. Telephone Co., 216 N.C. 235, 4 S.E.2d 439. The action is one sounding in tort.
The demurrer of the individual defendants was likewise properly overruled. It is alleged that they were officers and agents of the corporate defendant and "actually caused and participated in the wrongful acts" of their principal, which are specifically set out. This saves the complaint from fatal infirmity as to the individual defendants. State v. Trust Co., 192 N.C. 246, 134 S.E. 656, McIntosh on Procedure, 455.
The sufficiency of the facts alleged to make out a case of actionable fraud on the part of the corporate defendant is not challenged. Hill v. Snider, 217 N.C. 437, 8 S.E.2d 202; Griggs v. Griggs, 213 N.C. 624, 197 S.E. 165; Stone v. Milling Co., 192 N.C. 585, 135 S.E. 449. If the individual defendants actually caused and participated in these alleged wrongful acts, it must follow that they also participated in the alleged fraud and deceit. At least, such is the reasonable intendment of the complaint. Foy v. Stephens, 168 N.C. 438, 84 S.E. 758. "It is not necessary that the word 'fraud' be used in the pleading, nor that it be alleged in direct terms, if the facts averred contain all the essential elements of fraud". Petty v. Ins. Co., 210 N.C. 500, 187 S.E. 816, 818.
It will be readily conceded that a characterization of "fraud" without any facts to support it is a mere brutum fulmen. Dixon v. Green, 178 N.C. 205, 100 S.E. 262; Baker v. Atlantic R. R., 205 N.C. 329, 171 S.E. 342; Andrews v. Seaboard R. R., 200 N.C. 483 157 S.E. 431. On the other hand, a complaint which alleges facts from which the fraudulent intent may reasonably be inferred, or presumed, or necessarily results, will be upheld as against a demurrer. Dixon v. Green, supra; Foy v. Stephens, supra; Greene County v. National Bank, ...
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