Beckroge v. South Carolina Public Service Co.

• Decision Date: 12 October 1937
• Docket Number: 14544.
• Citation: 193 S.E. 315,185 S.C. 210
• Parties: BECKROGE v. SOUTH CAROLINA PUBLIC SERVICE CO. (two cases).
• Court: South Carolina Supreme Court

193 S.E. 315

185 S.C. 210

BECKROGE v. SOUTH CAROLINA PUBLIC SERVICE CO. (two cases).

No. 14544.

Supreme Court of South Carolina

October 12, 1937

Appeal from Common Pleas Circuit Court of Charleston County; Hayne F. Rice, Judge.

Actions by F. Addie Beckroge and by Henry L. Beckroge, by his guardian ad litem, F. Addie Beckroge, against the South Carolina Public Service Company, which were tried together. From adverse judgments, the defendant appeals.

Affirmed.

Hagood Rivers & Young, of Charleston, for appellant.

Paul M Macmillan and Louis M. Shimel, both of Charleston, for respondents.

FISHBURNE Justice.

This is an appeal from two separate judgments. The actions were commenced separately, but tried together, and separate judgments were entered. The decision in each case depends on the same issues of law and fact. This being true, we will in our discussion specifically refer only to the case of the plaintiff, F. Addie Beckroge.

In her complaint it is alleged that on December 6, 1930, she purchased 37 shares of stock of the Central Public Service Corporation, and paid therefor $2,220, and that she paid $720, as partial payments on other shares in the same corporation, all of which she purchased and acquired through the defendant, South Carolina Public Service Company, its agents and servants. That the defendant agreed and promised to refund to her the purchase money of so much of the stock as was paid for in full, and to return all partial payments with interest at 5 per cent., at any time she requested it. That thereafter the plaintiff tendered to the defendant the stock so purchased by her, and requested the defendant to comply with its agreement and refund to her the money she had paid; that the defendant did return to the plaintiff the sum of $754.39, this being the amount of the partial payments on certain shares of stock, with 5 per cent. interest as agreed, but that it has failed and refused to refund to her the sum of $2,220 paid for the aforesaid 37 shares of stock, which are now approximately worthless and unmarketable. The prayer of the complaint is for $2,220, and costs.

The defendant denied the material allegations of the complaint, and pleaded the statute of frauds; and further, that the alleged contract, even if made-which it denied-was ultra vires, beyond the corporate powers of the defendant, the said capital stock of the Central Public Service Corporation being neither the capital stock of the defendant nor owned by it; and further alleged that under its charter it had no power or authority to engage in the sale of the capital stock of other corporations now owned by it. The defendant also set up in its answer that the alleged contract to repurchase the stock bought by the plaintiff, even if made-which it denied-lacked consideration, and also that such alleged contract or agreement did not provide that it was to be performed within the space of one year from the making thereof, and for that reason was unenforceable, under section 7044 of the 1932 Code of Laws.

We assume that the defense pleaded, that the alleged agreement was not to be performed within the space of one year from the making thereof, has been abandoned. The exceptions do not refer to this issue, nor does the brief of appellant.

The defendant, which is known as the local gas company in Charleston, was a constituent corporation of the Central Public Service Corporation or system. The pyramid of this system was composed of about 80 subsidiary corporations, and the Central Public Service Corporation occupied its apex. The proceeds derived from the sale of the stock purchased by the plaintiff were to be used, and, in accordance with the testimony, were used, for the benefit of the defendant and other corporations in the system. Prior to the date of the transaction here involved, the Central Public Service Corporation, through A. E. Peirce & Co., in which latter corporation some of the officers of the defendant gas company were also officers, initiated a stock selling program for the sale of the capital stock of the Central Public Service Corporation, which was the parent corporation, and, in furtherance of the plan, sold a large portion of the stock in the city of Charleston and elsewhere. In Charleston the sale of the stock was handled by R. E. Johnson, and 18 or 20 employees of the defendant gas company, co-operating with him, who actively solicited and pressed the sales in that city. Johnson received a commission of $2.50 on each share of stock sold, and each employee similarly engaged received 50 cents a share for every share of stock he sold. Also co-operating and acting with Mr. Johnson were the local managers of the defendant gas company, who sold stock and received commissions thereon. Money received from the sale of the stock in cash by R. E. Johnson was turned in to the defendant's local office, and the defendant issued its check therefor payable to A. E. Peirce & Co., and money paid direct at the defendant's local office for stock was received and handled by its cashier, and remitted to A. E. Peirce & Co.

The stock in question was sold to the plaintiff by R. E. Johnson in the office of the defendant gas company and all payments made by her were made there. During the sales campaign, Johnson, who was not an employee of the defendant, was given the use of an office and a desk in the building of the defendant, and the plaintiff was instructed by Johnson to call him there on the telephone at any time she desired to communicate with him. This she did. She testified that Johnson stated to her, at the time she bought the stock, that he represented the defendant; that the investment was perfectly safe; that she could not possibly lose $1 of her money, and that either the defendant company or A. E. Peirce & Co., would refund her money whenever demand was made, on all shares paid in full by her; and that money paid on account, by way of partial payments, would be refunded, with 5 per cent. interest. Thereafter when she demanded of A. E. Peirce & Co. a refund of the partial payments made on account of stock, with 5 per cent. interest, she received a check from this company in full for such partial payments, and the manager of the defendant gas company came to her home with a release in connection with the refund, which she signed at his request.

This action is for a breach of the alleged contract on the part of the defendant for the repurchase of the stock bought outright by the plaintiff, and the refund of the amounts paid by her in full for this stock. As heretofore mentioned, stock in the Central Public Service Corporation was sold to obtain funds for the upbuilding of the defendant gas company, and other companies in the group, and it was testified by a witness for the defense that funds so derived were actually used for the benefit of the defendant gas company in the city of Charleston.

A résumé of the testimony will make clearer the issues presented.

On the desk in the office of the defendant company, used by Johnson, were spread pamphlets and folders advertising the stock in question, which were distributed by Johnson and the regular employees of the defendant among customers and others to stimulate and effect sales of this stock issued by the parent company-the Central Public Service Corporation-of which the defendant was a subsidiary.

Desiring to dispose of her stock, the plaintiff first applied to A. E. Peirce & Co. at their Chicago office, and was advised by this company, in effect, on February 10, 1932, that the stock was practically worthless. It was then that she demanded of the local company that it comply with its alleged agreement to repurchase the stock and refund her money.

One of the folders distributed by Johnson from the office of the defendant was entitled, "How you can invest with safety at over 6 3/4%." On the first sheet of this pamphlet appears in pen and ink the name of "C. C. Heidt," who was the bookkeeper of the defendant, and the notation, "Phone 3974," which telephone number was that of the defendant. The employees of the defendant were requested by its manager to co-operate with Mr. Johnson in selling the stock of the Central Public Service Corporation. Frequent meetings were called by Johnson, attended by the employees of the defendant, who were there at the request of the defendant's manager, and who were schooled and instructed by Johnson in how to make sales talks to prospective customers. The pamphlet to which we have referred contains the following statements and representations:

"How big is this Corporation?

Central Public Service Corporation has assets of over $364,000.00. Its subsidiaries serve over 635 000 customers and more than 65 000 investors own its stock.

How much business does the Corporation do?

Its gross revenues for the year ending December 31, 1930 (exclusive of companies located in the Canary Islands) were more than $43,000.00.

Are they safe?

They represent an investment in one of the most essential of modern industries. Electricity and gas are necessities of modern life. Years of stable and increasing demand have given public utility securities an enviable record of safety.

Where can I secure further information about this investment?

Any employee will be glad to give you information about these shares. They may be purchased for cash or on the Thrift Plan-$10 a share with application and $10 a share monthly.

Your investment in this nation-wide utility corporation is backed not only by your local company [italics ours], but by companies serving 683 other communities.

* * * It gives you a place to put your savings where you know they will be safe and will earn for you a regular and liberal return."

Another folder distributed from the office of...