Elizabeth City Hotel Corp. v. Overman

• Decision Date: 23 September 1931
• Docket Number: 12.
• Citation: 160 S.E. 289,201 N.C. 337
• Parties: ELIZABETH CITY HOTEL CORPORATION v. OVERMAN.
• Court: North Carolina Supreme Court

160 S.E. 289

201 N.C. 337

ELIZABETH CITY HOTEL CORPORATION v. OVERMAN.

No. 12.

Supreme Court of North Carolina

September 23, 1931

Appeal from Superior Court, Pasquotank County; Clayton Moore Special Judge.

Action by the Elizabeth City Hotel Corporation against T. L Overman. From a judgment for plaintiff, defendant appeals.

No error.

Evidence of oral representations varying written stock subscription contract held properly excluded, in absence of fraud, where by its terms, contract contained entire agreement.

This is an action to recover on a stock subscription agreement executed by the defendant on May 11, 1926. The agreement is in writing, and was executed by defendant prior to the incorporation of plaintiff. Plaintiff is a domestic corporation, organized under the laws of this state.

By the terms of said agreement, defendant subscribed for ten shares of the preferred and five shares of the common stock of plaintiff; he promised to pay to plaintiff, for said shares of stock, the sum of $1,000, in monthly installments, as set out in the agreement. None of the installments has been paid. The final installment was due and payable on July 20, 1927. This action was begun on April 10, 1929.

In his answer, the defendant admitted the execution by him of the stock subscription agreement as alleged in the complaint. He relied upon two defenses: (1) That the execution of the agreement was procured by false and fraudulent representations, as specifically alleged in his answer; and (2) that the stock subscription agreement is null and void for that it fails to comply with certain provisions of chapter 190, Public Laws 1925, known as the ""'Capital Issues Law' of the State of North Carolina."

The stock subscription agreement, which was offered in evidence at the trial, contains a paragraph at the end thereof as follows: "(6). No representations, statements or agreements other than as herein recited have been made, or are binding on said corporation, and my entire contract is herein expressed."

The representations alleged in the answer are not recited in said agreement. All these representations are promissory in their nature. As a witness in his own behalf at the trial, defendant testified that he can read and write, and that he read the "bottom of the agreement" before he signed the same. There was no evidence tending to show that defendant, at the time he signed the agreement, was prevented from reading the entire agreement. On objection by the plaintiff, evidence offered by defendant tending to support the allegations in his answer with respect to the representations was excluded. Defendant excepted to the exclusion of this evidence.

Section 8 of chapter 190, Public Laws 1925, known as the "'Capital Issues Law' of the State of North Carolina," and governing the sale in this state of stocks, bonds, and other securities at the date of the execution of the stock subscription agreement sued on in this action, contains the following statutory requirement:

"The contract of subscription or of sale shall be in writing and shall contain a provision in the following language:

"'No sum shall be used for commissions, promotion and organization expenses on account of the sale of any securities offered for sale by this company in excess of five per centum of the amount actually paid upon separate subscriptions for such securities." D'

This provision is not contained in the stock subscription agreement sued on in this action. However, subsection 8 of section 4 of chapter 190, Public Laws 1925, expressly exempts, from the provisions of the Capital Issues Law, ""subscriptions for shares of the capital stock of a domestic corporation prior to the incorporation thereof, when no expense is incurred, and no commission, compensation, or remuneration is paid or given for, or in connection with, the sale or disposition of such securities."

The evidence at the trial showed that defendant subscribed for the shares of the capital stock of plaintiff upon the solicitation of a citizen of Elizabeth City, who received no commission or other compensation for procuring the execution by defendant of the stock subscription agreement. This citizen was acting for and in behalf of a committee known as the "Elizabeth City Hotel Committee." This committee received no commission or other compensation for the sale of the capital stock of plaintiff. The committee was composed of citizens of Elizabeth City, who were interested primarily in the building of a hotel in Elizabeth City as a community enterprise. The committee was organized for the purpose of investigating the conditions in Elizabeth City, and determining whether such conditions justified the building of a new hotel in said city.

On November 23, 1925, the "Elizabeth City Hotel Committee" entered into a contract with the Hockenbury System, Inc., by the terms of which the said Hockenbury System, Inc., agreed to make a survey of the conditions in Elizabeth City, affecting the proposition under consideration by the committee, and to report to said committee the facts disclosed by said survey. It was agreed that, if the committee, after receiving the report of the Hockenbury System, Inc., should decide to proceed with its plans to organize a corporation for the purpose of building a hotel in Elizabeth City, and to solicit...