Davis & Clanton v. C. I. T. Corp.

• Decision Date: 05 April 1939
• Docket Number: 14855.
• Citation: 2 S.E.2d 382,190 S.C. 151
• Parties: DAVIS & CLANTON v. C. I. T. CORPORATION et al.
• Court: South Carolina Supreme Court

2 S.E.2d 382

190 S.C. 151

DAVIS & CLANTON v. C. I. T. CORPORATION et al.

No. 14855.

Supreme Court of South Carolina

April 5, 1939

The order of Judge Lide follows:

The plaintiff is a South Carolina corporation. The defendant C I. T. Corporation is a corporation under the laws of the State of West Virginia; the defendant W. N. Gause is a resident of the County of Florence, State of South Carolina and the defendant T. H. Stryker is a resident of the State of North Carolina. Within due time after the service of the summons and complaint herein the defendant corporation filed its bond and petition for removal of the cause to the District Court of the United States for the Eastern District of South Carolina. Thereafter Hon. E. C. Dennis, Circuit Judge, signed an order approving the petition and bond, but subsequently counsel for the plaintiff reopened the matter by a motion before me, which may be treated as a petition to rescind the removal order, and the matter was very fully argued before me both orally and by written briefs; and I have given somewhat extended consideration to the questions involved.

The petition for removal herein shows that the grounds relied on by counsel for the defendant corporation are:

(1) That there is a separable cause of action or controversy as to the defendant corporation.

(2) That the joinder of W. N. Gause, resident defendant, is fraudulent.

As to whether there is a separable controversy depends of course on the allegations of the complaint. As I read the complaint herein the foundation of plaintiff's claim is an alleged contract set forth in paragraph IV. It is true that the plaintiff insists that the cause of action is one in tort for fraud and deceit only, and that the "so-called contract" was alleged only to give the background of the action. But paragraph IV alleges an offer and an acceptance the offer consisting of a promise that the defendant corporation would furnish and supply all credit necessary to the proper and efficient conduct of plaintiff's business provided plaintiff would execute to defendant corporation a blanket mortgage covering all of its used cars and shop equipment, and deliver to the defendants all of its house notes, and would permit defendants to take all of its new cars to Florence for periodic redelivery to plaintiff together with new cars as needed for sales. It is further alleged that plaintiff complied with the terms and conditions above stated in full, which of course constituted an acceptance of the offer. Clearly this made a contract, and the gravamen of plaintiff's complaint is that instead of furnishing and supplying the needed credit the defendant corporation breached its said contract and refused to furnish credit as promised, but on the contrary, acting through its agents, Gause and Stryker, in furtherance of a fraudulent scheme and with a fraudulent intention, committed acts, alleged to be fraudulent and malicious, resulting in the destruction of plaintiff's business, the depreciation of its assets, and the wiping out of its credit, to its damage in the sum of $100,000.

If the foregoing brief summary of the complaint is correct, the alleged cause of action may be correctly termed as a fraudulent breach of contract. Our own Supreme Court has frequently dealt with this general subject, more often in cases relating to policies of insurance. A very recent case is that of Branham v. Wilson Motor Company, 188 S.C. 1, 198 S.E. 417, in which the opinion was filed August 16, 1938. In this case it is alleged that the "defendant had no intention of carrying out the said agreement at the time of entering into it," a somewhat similar allegation to that involved in the case at bar, because it is here alleged that the original promises were "fraudulent and faithless". In the Branham case the Court held that while there were allegations of fraudulent intention, there was no sufficient allegation of a fraudulent act accompanying the breach with fraudulent intent to cheat and defraud; and affirmed the action of the Circuit Judge in striking out the cause of action for punitive damages. But where there is a breach of contract with fraudulent intention, and there is a fraudulent act or acts accompanying the breach, punitive damages may be recovered as well as the actual damages arising from a breach of the contract.

In the case of Broome v. Travelers Insurance Co., 183 S.C. 413, 191 S.E. 220, 221, the Court says: "It is true that, in Dyson v. Commonwealth Life Insurance Company, 176 S.C. 411, 180 S.E. 475, 476, we approved the holding of the trial judge 'that a fraudulent breach of a contract is a tort.' Whether such holding is in conflict with expressions used by the court in some prior decisions, is not here important. We have held in several recent cases of the kind before us, where the question here raised was indirectly involved, that actual damages are recoverable, although the recovery of punitive damages, as no fraud was proved, was not allowed."

The individual defendants in the case at bar were of course not parties to the alleged contract; and if this action had been brought solely for actual damages for an alleged breach of such contract, then the individual defendants would have been neither necessary nor proper parties. Since in the instant cause actual damages would be recoverable from the defendant corporation alone upon proof of the alleged...