Herring v. Cumberland Lumber Co.

• Decision Date: 28 May 1912
• Citation: 74 S.E. 1011,159 N.C. 382
• Parties: HERRING et al. v. CUMBERLAND LUMBER CO. et al.
• Court: North Carolina Supreme Court

74 S.E. 1011

159 N.C. 382

HERRING et al. v. CUMBERLAND LUMBER CO. et al.

Supreme Court of North Carolina

May 28, 1912

Appeal from Superior Court, Sampson County; G. W. Ward, Judge.

Action by A. R. Herring and others against the Cumberland Lumber Company and others. Judgment for defendants, and plaintiffs appeal. New trial.

In an action for a contract penalty for failure to construct a railroad near plaintiff's land, the complaint having stated facts authorizing judgment for plaintiff for the difference between what he received from defendant for timber sold and its true value, evidence that defendant purchased the timber at less than its true value because of its promise to construct the railroad was admissible.

Geo. E Butler, for appellants.

Stevens Beasley & Weeks, for appellees.

WALKER J.

This action was brought to recover the amount of a penalty imposed by a contract between the plaintiff and the Wallace manufacturing Company for failure to comply with one of its stipulations. The question involved arose upon the following facts: Plaintiff and certain other neighboring landowners agreed to sell the timber on their lands to the said company for a stated price, and defendant agreed to pay the price and also to construct a standard gauge railroad from Delway to Wallace, and to complete the same for use and transportation on or before March 15, 1908, and, upon failure to do so, it is provided by the contract that the Wallace Manufacturing Company shall forfeit and pay to the said landowners, as a penalty, an amount equal to 10 per cent. of the price paid for the timber, and 2 1/2 per cent. on said price for each additional year of its default during the next five years making 22 1/2 per cent. in all if the default should continue as long as five years after March 15, 1908. The parties conveyed the timber by deeds to the Wallace Company, coupled with the right to cut timber of a certain fixed dimension, and to build on the land roads, tramroads, and railroads for the purpose of cutting and removing the timber. There is a provision in the deed that the trees sold to the company shall not be removed except by the standard gauge railroad. The Wallace Company conveyed to the defendant Cumberland Lumber Company "the timber and tree rights, property rights, and easements" acquired under the deed of the plaintiff to it. The standard gauge railroad has never been constructed, and plaintiff sues to recover the penalty alleged to be due to him by the terms of his deed to the Wallace Company.

The defendants' counsel contend that the building of a standard gauge road is not within the chartered powers and privileges of the defendants, and that it is also expressly forbidden by Revisal, § 2598. We need not decide whether or not this is a correct position, as we are of the opinion with the plaintiff upon another view of the matter. It appears in the case that the plaintiff and his neighbors, who joined with him in the agreement to sell their timber to the Wallace Manufacturing Company, one of the defendants, were influenced in fixing the price of the same by the stipulation of the said company to construct this road, and that they sold the timber at much less than its reasonable worth because of this agreement, believing that, if the road was built and put into operation, the benefit or advantage they would derive therefrom would compensate them for the loss of the difference between the price charged by them for the timber and the real value thereof. This being so, it would seem to be very unjust and inequitable that the defendants should repudiate their agreement and rely on its invalidity for the purpose of evading the payment of a reasonable price for the timber; in other words, that they should be allowed to keep the amount of the difference between the price paid for the timber and its true value, and at the same time refuse to execute their part of the contract to build the road, even upon the ground that it is malum prohibitum. If the stipulation to construct the road is invalid, the plaintiff, if particeps criminis, is not in pari delicto. He can recover the amount of his loss without declaring upon the alleged illegal stipulation, and relief can be given without enforcing this part of the contract. In such a case, the action, it may be said, is not based on the agreement alleged to be illegal or invalid, but on the promise created by law to repay money of the plaintiff improperly obtained. 9 Cyc. p 547.

The principle governing such cases is well stated in Lester v Howard Bank, 33 Md. 558, 3 Am. Rep. (Anno. Ed. 1912) 211: "The rule of law is well settled that no action will lie to enforce a contract malum in se, nor, if executed, to recover money paid under it. In all such cases the maxims 'ex turpi causa non oritur actio,' and 'in pari delicto potior est conditio defendentis et possidentis,' apply. In regard to contracts not immoral or criminal in themselves, but prohibited by statutory law, the same general rule may be said to apply, not, however, universal in its application, but subject to certain exceptions as binding in authority...