Hill v. Hill Spinning Co.

• Decision Date: 10 October 1956
• Docket Number: No. 172,172
• Citation: 244 N.C. 554,94 S.E.2d 677
• Court: North Carolina Supreme Court
• Parties: N. B. HILL (Original Party Plaintiff), and Lydia Worthington Hill and Brant Waters, Co-Executors of the Estate of N. B. Hill, deceased (Additional Parties Plaintiff), v. HILL SPINNING COMPANY, Incorporated.

Page 677

94 S.E.2d 677

244 N.C. 554

N. B. HILL (Original Party Plaintiff), and Lydia Worthington

Hill and Brant Waters, Co-Executors of the Estate

of N. B. Hill, deceased (Additional

Parties Plaintiff), v. HILL SPINNING COMPANY, Incorporated.

No. 172

Supreme court of North Carolina.

Oct. 10, 1956

R. M. Holland, Roseboro, and Butler & Butler, Clinton, for plaintiffs, appellees.

Jones, Reed & Griffin, Kinston, for defendant, appellant.

BOBBITT, Justice.

We need not consider whether it was permissible for defendant to allege as a counterclaim or defense the same facts it had alleged in its said prior action. Suffice it to say, defendant has not alleged such facts.

In a complaint, if plaintiff undertakes to allege two or more separately stated causes of action, each must be complete within itself. It is not permissible to incorporate by reference allegations made in another separately stated cause of action. Heath v. Kirkman, 240 N.C. 303, 82 S.E. 2d 104, and cases cited. A fortiori, it is not permissible for a plaintiff to incorporate by reference allegations made by him in a pleading filed in a separate and independent action. This rule applies equally when a defendant attempts to allege a cause of action as a counterclaim.

Paragraph 3 of defendant's further answer and defense rests wholly on the allegations in its pleadings in said prior action, which defendant attempted to incorporate by reference. When we exclude these from consideration, said paragraph 3 does not state facts sufficient to consitute a cause of action. Hence, the orders sustaining plaintiffs' demurrer and motion to strike were proper.

Even so, analysis of the pleadings in said prior action must be made to determine the validity of defendant's plea in abatement. In this connection, it is noted that the record on this appeal contains only the pleadings filed by the plaintiff (corporation) in said prior action. The reply affords no assistance since the answer to which it relates does not appear.

In its complaint in said prior action, the plaintiff alleged generally that Hill, as president and treasurer of the corporation from 1940 until the action was commenced, had full charge of the corporation's finances and operations; that he withdrew and fraudulently misapplied to his own use and to the use of his codefendants funds of the corporation in an amount in excess of $100,000, all with the knowledge, acquiescence and approval of his codefendants; and that the funds so misappropriated were used in acquiring various properties, title to which was taken in the name of the defendants or one or more of them.

When the plaintiff filed its bill of particulars it thereby confined its. case to the items specified therein. Beck v. Lexington Coca-Cola Bottling Co., 214 N.C. 566, 199 S.E.924. The bill of particulars, omitting details, specified these alleged withdrawals and misappropriations of the corporation's funds, to wit:

1. During 1946-1954, inclusive, Hill traded in cotton futures in the name of the corporation, using the corporation's credit and funds, realizing a net gain from such trading of $6,584.63. However, Hill caused entries to be made on the corporation's books reflecting a net loss of $31,523.86. The total of these two items, to wit, $38,108.49, was 'fraudulently withdrawn, misapplied and misappropriated by the said defendant (Hill), and through him by his codefendants * * *.'

2. During 1947-1954, inclusive, Hill traded in cotton futures 'for his own personal use and benefit, and for the use and benefit of his codefendants and others than the plaintiffs,' using the funds and credit of the corporation, and in so doing lost $19883.91. However, Hill caused book entries to be made showing this to be the corporation's loss.

And the plaintiff in said prior action, in its bill of particulars, modified its prayer for relief, alleging that the defendants were jointly and severally liable to it in the amount of $57,992.50.

The rules applicable when considering a plea in abatement on the ground that 'there is another action pending between the same parties for the same cause', G.S. § 1-127(3), are stated, with full citation of authority, by Ervin, J., in McDowell v. Blythe Brothers Co., 236, N.C. 396, 72 S.E. 2d 860, and by Winborne, J. (now C. J.), in Dwiggins v. Parkway Bus Co., 230 N.C. 234, 52 S.E.2d 892.

Defendant's plea in abatement is good only if (1) the plaintiffs herein could obtain the same relief by counterclaim in said prior action, and (2) a judgment in favor of the plaintiff in said prior action (defendant herein) would operate as a bar to plaintiffs' prosecution of this action. Cameron v. Cameron, 235 N.C. 82, 86, 68 S.E.2d 796, 31 A.L.R.2d 436, and cases cited.

The said prior action was in tort for alleged conversion of the corporation's funds. Whether Hill's claim for salary was permissible as a counterclaim therein is governed by the provisions of G.S. § 1- 137(1). Garrett v. Rose, 236 N.C. 299, 305, 72 S.E.2d 843. The words and phrases used in G.S. § 1-137(1) are defined by Barnhill, J. (later C. J.), in Hancammon v. Carr, 229 N.C. 52, 47 S.E.2d 614. In Bitting v. Thaxton, 72 N.C. 541, under a somewhat similar factual situation, such a counterclaim was held to be permissible. We need not decide whether the cited case would control decision under the facts here. Compare: Commercial Finance Co. v. Holder, 235 N.C. 96, 68 S.E.2d 794. We may concede, for present purposes, that Hill's claim for back salary was permissible as a counterclaim in said prior action.

Be that as it may, we have reached the conclusion that, under applicable decisions of this Court, the said prior action and this action are not for the same cause of action within the meaning of G.S. § 1- 127(3). See, also, G.S. § 1-133 and McDowell v. Blythe Brothers Co., supra. The basic reason is that a defendant, having a cause of action against the plaintiff, even if permissible as a counterclaim, may elect to plead it as such or institute a separate action thereon unless the issues raised in the prior action, if answered in favor of the plaintiff therein, would preclude and bar the prosecution of the second action. Cameron v. Cameron, supra, and cases cited; Union Trust Co. v. McKinne, 179 N.C.328, 102 S.E. 385; Francis v. Edwards, 77 N.C. 271; McIntosh, N.C. P. & P., sec. 468.

In Allen v. Salley, ...