Cody v. Hovey

• Decision Date: 01 November 1939
• Docket Number: 306.
• Citation: 5 S.E.2d 165,216 N.C. 391
• Parties: CODY v. HOVEY.
• Court: North Carolina Supreme Court

5 S.E.2d 165

216 N.C. 391

CODY v. HOVEY.

No. 306.

Supreme Court of North Carolina

November 1, 1939

This was an action upon a judgment rendered by a court in the state of New York against the defendant in the sum of more than a million dollars. The complaint alleged that the New York court had jurisdiction of the person of the defendant by proper service, and of the subject matter; that the defendant answered and appeared in that court, and the action was tried before a jury resulting in verdict and judgment for plaintiff; that upon appeal by defendant to the Appellate Division of the New York Supreme Court the judgment was affirmed; that no part of the judgment has been paid.

The defendant in this action, in the Superior Court of Caldwell County, filed answer admitting all the allegations of the complaint, but alleged as a defense, (1) that the judgment was procured by fraud by reason of the false testimony of a witness, and (2) that the transaction upon which the judgment in suit was based was a gambling transaction, on margin prohibited by the North Carolina statute, C. S. § 2144, as amended by Pub.Laws 1931, c. 236, and that the jurisdiction of the North Carolina courts was not available for the enforcement of such a judgment. The defendant further set up a counterclaim for abuse of process incident to the institution of this suit.

The plaintiff demurred to the several defenses set up in the answer, and to the counterclaim, and moved for judgment on the pleadings. The court below sustained the demurrer to the defense of fraud in the procurement of the judgment, and overruled the demurrer as to the defense under C.S. § 2144 as amended, The court also sustained the demurrer to the counterclaim and denied plaintiff's motion for judgment on the pleadings. From the order embodying these rulings, both plaintiff and defendant appealed.

Gover & Covington, of Charlotte, for plaintiff.

Pritchett Strickland & Farthing, of Lenoir, for defendant.

Plaintiff's Appeal.

DEVIN Justice.

Ordinarily an appeal from the denial of a preliminary motion for judgment on the pleadings will be dismissed as premature and involving no substantial right (Johnson v. Pilot Life Ins. Co., 215 N.C. 120, 1 S.E.2d 381), and a demurrer to the sufficiency of the answer is in some respects equivalent to a motion by plaintiff for judgment on the pleadings, but where the defendant admits all the allegations of the complaint and sets up an affirmative defense based on new matter alleged in his further answer, a demurrer on the part of the plaintiff challenges the sufficiency of the only pleading which raises an issue and goes to the heart of the controversy, and affords a direct approach to a determination of the action. Hence an appeal from a judgment overruling or sustaining plaintiff's demurrer merits the consideration of the court. C.S. § 525. As was said by Clark, C. J., in Shelby v. Charlotte Electric R. R., 147 N.C. 537, 61 S.E. 377, 378: "It is true that, when a demurrer to the whole cause of action or to the whole defense is either overruled or sustained, an appeal lies." Alston v. Hill, 165 N.C. 255, 81 S.E. 291; Chambers v. Seaboard Airline R. R., 172 N.C. 555, 90 S.E. 590; Pridgen v. Pridgen, 190 N.C. 102, 129 S.E. 419; Pilot Real Estate Co. v. Fowler, 191 N.C. 616, 132 S.E. 575; McIntosh, sec. 475.

The plaintiff's principal assignment of error relates to the overruling of his demurrer to the following defense contained in the answer: "That the transaction upon which said judgment was obtained was a gambling and speculative futures transaction, and a transaction wherein the plaintiff purchased certain stocks through Herman W. Booth, upon margin without any contract or intention that said stocks were ever to be actually delivered, and without any agreement that the said plaintiff could demand an actual delivery of said stocks, but that same were purchased on a margin for wholly speculative purposes, as is well shown by the evidence taken in the trial of this cause in the State of New York and that said stocks and bonds remained with the said Herman W. Booth at all times, and were never actually delivered by the said Herman W. Booth to the plaintiff herein, but were held and sold from time to time as plaintiff and Herman W. Booth ascertained they had a profit in said stocks, or that they concluded that they had sustained sufficient loss as they desired on account of the fluctuations of the said New York Stock Exchange."

The statute C.S. § 2144 declares null and void contracts for the purchase and sale of certain articles, including stocks and bonds, when it is not intended that the articles or things shall be actually delivered, but it is understood that money shall be paid depending upon the fluctuations of the market price, and no real transaction is contemplated, and provides that no action shall be maintained to enforce such contract or on account of any money paid or advanced in connection with such contract. The statute makes the further provision: "Nor shall the courts of this state have any jurisdiction to entertain any suit or action brought upon a judgment based upon any such contract." This statute was amended by Chap. 236, Public Laws of 1931, by adding the proviso that the section should not apply to contracts for the purchase or sale for future delivery of any of the articles mentioned where such purchase or sale was made on any exchange on which such articles were regularly bought and sold, and where the rules of the exchange permitted either party to the contract to require delivery. The amendment also repealed sections 2145 and 2146 of the Consolidated Statutes relating to the prima facie effect of margins and the burden of proof in cases coming under section 2144. This statute was recently considered by this court in Fenner v. Tucker, 213 N.C. 419, 196 S.E. 357. It will be noted that the contract construed in that case antedated the enactment of Chap. 236, Public Laws of 1931.

The North Carolina statutes relating to gambling contracts and futures were not intended to affect transactions where the property, though purchased for speculative purposes, was delivered to the purchaser or his agent, and paid for in whole or in part. Ordinary transactions whereby men purchase real estate, a car load of mules, or a stock of goods, in the hope of selling at a profit, are not to be distinguished from the purchase and sale of bales of cotton or shares of stock when delivery is made or intended to be made in the regular course of business dealing.

It is apparent that the transaction as alleged in the answer does not come within the prohibition of the statute. The defendant's connection, if any, with the transaction...