Etiwan Fertilizer Co. v. Johns
| Decision Date | 18 January 1943 |
| Docket Number | 15490. |
| Citation | 24 S.E.2d 74,202 S.C. 29 |
| Parties | ETIWAN FERTILIZER CO. v. JOHNS et al. |
| Court | South Carolina Supreme Court |
Searson & Searson, of Allendale, and T. M. Boulware, of Barnwell for appellants.
Legge & Gibbs, of Charleston, H. L. O'Bannon, of Barnwell and J. Wesley Crum, of Denmark, for respondent.
Appellants seek the reversal of an order of the Circuit Court striking out as sham and frivolous their answer and counterclaim, and awarding judgment to the plaintiff on the pleadings.
This action was commenced on June 10, 1938, by Etiwan Fertilizer Company against the defendants, W. R. Johns, as principal and Elizabeth O. Johns, endorser, on a promissory note for the original amount of $10,899.20, plus interest and attorneys' fees, less certain admitted payments. The maximum amount now involved is $2,450,18. The cause was held in abeyance by agreement in writing, under which several extensions of time were granted the defendants to plead--until March 15, 1941. In the interim, the defendants made several substantial payments upon the indebtedness. The following provision is incorporated in the written agreement referred to: "And it is specifically understood and agreed between the respective parties to this agreement, that, by the execution thereof, the said W. R. Johns does not waive any defenses which he may, in any way, have to the said note."
Before the expiration of the time granted within which to plead, answer or demur, the defendants filed an answer and counterclaim which under the order of the Court was later amended, so that we here deal with the amended answer and counterclaim.
Within due time after the service of this pleading, the plaintiff moved for an order striking out the answer and counterclaim, and for judgment, "upon the ground that said answer and counterclaim is sham and frivolous, and stated no defense." The motion came on to be heard before the Circuit Judge upon the pleadings in the case, the affidavits and certain exhibits offered by the plaintiff, and counter affidavits offered by the defendants. The Court, without specifically holding that the amended answer and counterclaim was sham and frivolous, concluded that, "plaintiff is entitled to the order moved for;" awarded judgment as prayed for in the complaint, and directed that the amended answer and counterclaim be stricken out.
The first ground of appeal to be noticed is: May any counterclaim be stricken as sham? We answer this question in the affirmative.
Section 470, 1942 Code, provides that "sham and irrelevant answers and defenses may be stricken out on motion." Section 457 provides that "The only pleading on the part of the defendant is either a demurrer or an answer;" and Section 467, that "The answer of the defendant must contain: (1) *** (2) A statement of any new matter constituting a defense or counterclaim, in ordinary and concise language, without repetition."
It explicitly appears from the foregoing Sections of the Code that a counterclaim must be incorporated in an answer. It would make no difference if a portion of this answer be treated as a counterclaim, as the Code provision is directed not only against sham and irrelevant defenses, but to answers as well, and the counterclaim must be considered as a part of the answer. Any other construction would permit a defendant to evade the consequences of the statute and delay judgment, by interposing sham counterclaims instead of sham defenses. The practice of striking out counterclaims on the ground of being sham, irrelevant, and frivolous, has been consistently followed in this State. Swift & Co. v. Cook, 197 S.C. 454, 15 S.E.2d 773; Oswald v. Huggins, 171 S.C. 419, 172 S.E. 430; Germofert Mfg. Co. v. Castles, 97 S.C. 389, 81 S.E. 665; 49 C.J., Section 988, Page 699; 49 C. J., Section 993, Page 702.
Appellants contend that this answer and counterclaim should not have been stricken out as sham. A determination of this question requires an examination of the pleading.
The answer and the counterclaim are substantially identical in language. It is alleged that prior to the execution of the note set out in the complaint, the defendant W. R. Johns and the plaintiff entered into an agreement, partly oral and partly in writing, the written portion consisting of a contract known as a fertilizer agency contract. That under the terms of the oral contract and the written contract, the defendant Johns undertook the sale of fertilizers to be furnished him by the plaintiff, and on May 15, 1937, executed in favor of the plaintiff the promissory note in question, which was endorsed before delivery by the defendant Elizabeth O. Johns. It is alleged that under the terms of these agreements large discounts and adjustments to which the defendant Johns was entitled, were left open, the amounts of which at the date of the execution of the note had not been, and could not be determined until later in the Summer; and it was agreed between the parties that these credits would be later given. That in addition thereto the defendant Johns would be credited in such amounts as were necessary to have the note reflect the correct prevailing price of the fertilizer.
It is also alleged that the defendant would be given credit and an adjustment for the equalization of prices prevailing in the fertilizer market at the close of the 1937 fertilizer season, which is a trade custom followed by plaintiff and all other leading fertilizer manufacturers. The defendants allege that none of these things were done, and that without such agreement and the belief that it would be complied with, they would not have executed the note. Affidavits submitted by the plaintiff upon the hearing in the lower Court, deny all of these allegations; deny that the amount stated in the note did not reflect the correct price of the fertilizer; and further allege that prior to the execution of the note a statement of the fertilizer account was delivered to the defendant Johns; that Johns acknowledged the correctness of it, and executed the note. The plaintiff likewise denied making any verbal agreement with Johns.
A counter affidavit submitted by the defendant re-alleged that the statement prepared by the agent of the plaintiff did not reflect the true indebtedness of the defendant because of the large discounts and adjustments left open for later determination; and that it was definitely understood and agreed, between the plaintiff's agent and the defendant Johns, that all of these matters would be later ascertained and credited on the note, which, it is stated, was executed in order to expedite the plaintiff's financing. The defendant further set forth in his affidavit that he has in his possession figures in the handwriting of plaintiff's agent and acquiesced in by the plaintiff, which he will be ready to prove at the trial in substantiation of his answer and counterclaim. He specifically denied the statement in the agent's affidavit that no verbal agreement had been entered into.
A sham answer is one good in form, but false in fact, and not pleaded in good faith; being a mere pretense, set up in bad faith and without color of fact. Bliss, Code Pl. Page 645 (note 162). The motion to strike out an answer as sham presents a question of fact to be determined by...
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