Helms v. Holton
| Decision Date | 11 May 1910 |
| Citation | 67 S.E. 1061,152 N.C. 587 |
| Parties | HELMS v. HOLTON. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Guilford County; Ward, Judge.
Action by J. D. Helms against C. E. Holton. Judgment for plaintiff and defendant appeals. Reversed.
A plaintiff moving for judgment on the pleadings admits the truth of the allegations of fact in the answer.
Judgment was rendered for the plaintiff upon the pleadings. Defendant excepted and appealed to this court. The plaintiff sued to recover $6,000, evidenced by three notes, for $1,000, $2,000 and $3,000, each dated October 1, 1902, and interest from October 1, 1904. Defendant admitted execution of the several notes, and that he had paid no part of the principal and no interest since October 1, 1904. The defendant alleged matters in defense and as a counterclaim which may be thus summarized: He alleged: That in July, 1901, plaintiff and himself agreed to embark in the wholesale drug business in Greensboro, and to that end they agreed to organize a corporation to be known as the Holton-Helms Drug Company. That plaintiff stated that he was able to, and would, take stock therein to the amount of $10,000 in cash, and appellant, being then engaged in the retail drug business in Greensboro, also agreed to take $10,000 of stock in said company, putting in said retail drug business at its inventory value, and agreeing to make up any deficiency in his said subscription in cash. That said corporation was accordingly organized with an authorized capital stock of $100,000, and a subscribed capital stock of $25,000 consisting of the two subscriptions above mentioned, and a subscription of $5,000 by another person. That said corporation in supposed furtherance of the said business venture leased from W. D. McAdoo a lot in Greensboro, next to the McAdoo Hotel, and undertook to erect a building thereon, part of which was to be used for the business of said corporation and part for hotel purposes. That, in order to carry out this building scheme, said corporation agreed to take over, and did take over, from the lessee of said McAdoo Hotel the unexpired portion of the lease upon said hotel, then having several years to run, in order to avoid complications arising from the interference with said lessee's rights to light and air, likely to be caused by the erection of said new building adjacent to said hotel. The first of these leases was executed by the Holton-Helms Drug Company and by W. D. McAdoo, and the second by the same parties and C. E. Holton and J. D. Helms individually. That plaintiff and defendant agreed, in order to raise the money to erect said building, that said corporation should borrow the necessary funds from certain banks upon its note, indorsed by both plaintiff and defendant, and they agreed to defer calling for the payment of said subscriptions to said capital stock until after the completion of said building, and this was accordingly done. That said J. D. Helms had then in his hands as guardian the sum of $6,000, and this sum he agreed to loan, and did loan, to said corporation upon its note payable to him as guardian, and indorsed by both J. D. Helms and C. E. Holton, "and in this way the funds represented by the notes sued on were first evidenced." That, upon the completion of said building, appellant requested of respondent that he pay his said subscription of $10,000, but respondent delayed doing so, and finally stated to appellant that he, respondent, "was utterly without assets of his own of any kind, and was utterly unable to pay his said subscription of $10,000 to the capital stock of said corporation, or any other sum, stating at the time that all the assets he possessed of every kind and nature, even including his policies of life insurance, had been theretofore incumbered by mortgage to their full value." That at that time the indebtedness of the corporation was $27,699.51, incurred almost wholly on the indorsements of the plaintiff and defendant. That, believing these statements to be true and in reliance upon them, with the consent and at the suggestion of plaintiff, the defendant took the property of the corporation, assumed all its indebtedness (including that due plaintiff as guardian), and has paid the same or by executing new notes has relieved the plaintiff from liability to the holders. That new notes were executed to plaintiff. That the statements made by plaintiff were false and fraudulent. That they were cunningly devised to deceive and defraud defendant, and a trick and device conceived by plaintiff to escape his equal liability upon the notes, and his payment of his stock subscription. That the corporation was thereby rendered insolvent, and that defendant, relying upon these false and fraudulent statements, was induced to, and did, pay out large sums of money. That the falsity of plaintiff's statements and the fraud imposed upon defendant by plaintiff was not discovered until the fall of 1904, when defendant declined to pay the notes sued upon, then held by plaintiff.
W. P. Bynum and King & Kimball, for appellant.
Stedman & Cooke and R. C. Strudwick, for appellee.
This appeal coming to us from a judgment granted to the plaintiff upon the pleadings, we must, of course, assume that his honor held that the facts set up in the answer did not constitute in law or equity a defense to the notes or a counterclaim or set-off available to the defendant. The motion of the plaintiff for judgment upon the pleadings was in effect a demurrer to the answer, and, being such, admitted the truth of the facts alleged in the answer, and denied only their legal sufficiency. Considering the facts alleged in the answer to be true, we think they amount to an actionable fraud, resulting directly in such damages to the defendant as are capable of admeasurement under accepted and established rules. The chief contention relied upon by plaintiff is that there is "no legal causal connection between the alleged false representations and the alleged damages." The defendant alleges that, by reason of the false representations, believed by him and relied upon by him, he was induced to relieve the plaintiff of his liability on notes aggregating several thousand dollars, and himself alone to assume the payment of these notes. The plaintiff and defendant occupied to these notes the relation of co-sureties or co-indorsers for an insolvent corporation, in which plaintiff and defendant owned equal interests. The plaintiff never paid a dollar of his subscription, while the defendant had performed, in every particular, his obligation. By his misrepresentations the plaintiff has avoided the payment of his stock subscription and the payment of his one-half of the balance on the notes unpaid by the corporation, and has cast upon the defendant the entire burden of...
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