Hood v. Gordy Homes, Incorporated, 7795.

• Decision Date: 03 June 1959
• Docket Number: No. 7795.,7795.
• Citation: 267 F.2d 882
• Parties: C. E. HOOD, Jr., Appellant, v. GORDY HOMES, INCORPORATED, a Delaware Corporation, duly domesticated under the laws of the State of South Carolina, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

267 F.2d 882 (1959)

C. E. HOOD, Jr., Appellant, v. GORDY HOMES, INCORPORATED, a Delaware Corporation, duly domesticated under the laws of the State of South Carolina, Appellee.

No. 7795.

United States Court of Appeals Fourth Circuit.

Argued March 10, 1959.

Decided June 3, 1959.

M. H. Rosenhouse, Miami, Fla. (Jack N. Nathans, Charleston, S. C., and Rosenhouse & Rosenhouse, Miami, Fla., on brief), for appellant.

Albert W. James, Wilmington, Del. (J. Monroe Fulmer, Fulmer & Barnes, Columbia, S. C., and Morris, James, Hitchens & Williams, Wilmington, Del., on brief), for appellee.

Before SOBELOFF, Chief Judge, SOPER, Circuit Judge, and BOREMAN, District Judge.

SOBELOFF, Chief Judge.

This is the plaintiff's appeal from the District Judge's grant of the defendant's motion for involuntary dismissal of the suit, without prejudice. The plaintiff, C. E. Hood, Jr., sought to recover $25,000.00 from the defendant, Gordy Homes, Inc., on the following contract:¹

"This Memorandum of Agreement made and concluded at Aiken, in the County of Aiken, in the State of South Carolina, this 27th day of October, A. D. 1952, by and between Gordy Homes, Incorporated * * * and C. E. Hood, Jr. * * *

"Whereas, the execution and delivery of this Agreement has been directed and authorized under Resolutions of the Board of Directors of Gordy Homes, Inc., and pursuant to its By-Laws; and

"Whereas, Gordy Homes, Inc., is the owner of One-Half (O) of the issued and outstanding Capital Stock of Thomas Woods Corporation, a Georgia Corporation; and

"Whereas, C. E. Hood, Jr., has rendered valuable services to Gordy Homes, Inc., for which Gordy Homes, Inc., desires to compensate him in the sum of Twenty-Five Thousand ($25,000.00) Dollars, payable in the manner hereinafter set forth; Now Therefore,

"This Agreement Witnesseth that for and in consideration of the sum of Five Dollars ($5.00) paid by C. E. Hood, Jr., to Gordy Homes, Inc., it is mutually understood and agreed:

"1. That Gordy Homes, Inc., will pay to C. E. Hood, Jr., One-Half (O) of all monies received by it from Thomas Woods Corporation, such as dividends, or profits, until C. E. Hood, Jr., has been paid the said amount of Twenty-Five Thousand Dollars ($25,000.00).

"2. That C. E. Hood, Jr., will accept the said amount in full settlement for such services rendered.

"3. That this Contract shall not terminate until C. E. Hood, Jr., has been fully paid.

* * * * * *

"Gordy Homes, Incorporated "By: /s/ E. S. Gordy /s/ Chas. F. L. Hutchison (Corporate Seal Attached) "/s/ C. E. Hood, Jr. (Seal)" (Emphasis supplied.)

No dividends have ever been declared by the Thomas Woods Corporation; and the possibility of its producing a profit or issuing dividends in the future is extremely remote. In May, 1958, more than five years after the contract was entered into, the plaintiff Hood brought suit upon it for the $25,000.00. The defendant, Gordy Homes, Inc., does not deny the validity of the contract but asserts that no money is due Hood thereunder unless and until it receives monies from the Thomas Woods Corporation in the manner therein prescribed.

We turn to the genesis of the contract. Gordy Homes, Inc., is a Delaware corporation engaged in the construction business. Its directors agreed with a Georgia realty company to develop a housing project in Augusta, Georgia, and for this purpose the Thomas Woods Corporation was formed in 1951. Gordy Homes, Inc., and the realty company each put up one-half of the capital investment, and they received equal shares of the common stock of Thomas Woods Corporation. Construction was commenced, and Caromiss Lumber Company supplied all the lumber used in the project. The lumber transactions were between the plaintiff Hood, the managing partner in the Caromiss Lumber Company, and E. S. Gordy and Charles F. L. Hutchison, officers and directors of both Gordy Homes, Inc., and Thomas Woods Corporation.

On October 26, 1952, Hood met with E. S. Gordy and Hutchison, and they agreed to enter into the contract which was consummated in writing the following day and is here in issue. The contract, as we have seen, recites that Gordy Homes, Inc. "desires" to compensate Hood for the "valuable services" he had rendered to Gordy Homes, Inc. At the trial Hood explained these "valuable services," which relate to the Thomas Woods project, as follows:

"In trying to assist ‚Äî in assisting the planning and expediting and distributing of materials, the planning of the program, consulting with Mr. Gordy about various types of lumber, helping him arrive at decisions as to whether, for example, he should use 25/32nds or æths side-wall sheathing, or whether he could save a substantial amount of money by using 11/16ths board with a rough back, which on this particular job he did use and saved a very substantial amount of money * * In addition, the primary thing, was shortly before the execution of this contract, at Mr. Gordy\'s request, I arranged to defer obligations of Caromiss Lumber Company that had been discounted in banks in Mississippi for him that this business was not able to pay, and which if I hadn\'t arranged a deferred financing for them, the project could not have been completed, in my opinion." (Emphasis supplied.)

However, Hood testified that before the October 26 conference, E. S. Gordy had never "made any definite promise" to pay Hood for these "valuable services." Hood could only state that it was his "understanding" that he would be compensated for them. Significantly, he never made demand for any compensation until after the contract was entered into.

When the contract was made construction had been substantially completed, and the Thomas Woods Corporation was in the process of converting its financing, i. e., changing the construction mortgages on the property to the permanent mortgages necessary to sell the homes to the public. Permanent mortgages could not be obtained as long as money was due materialmen who could incumber the property by filing mechanics liens. In October, 1952, Thomas Woods Corporation owed Caromiss Lumber Company approximately $25,000.00.

The deposition of Hutchison, which was introduced at the trial by the plaintiff himself gave a more detailed version of the October 26 meeting. According to him, Hood stated that he was pressed for money and desired to collect the $25,000.00 lumber bill that Thomas Woods Corporation owed his concern, Caromiss Lumber Company. Hood proposed that Gordy Homes, Inc., should guarantee the account. This was agreeable to E. S. Gordy, provided Hood would "release the possible mechanics liens" that Caromiss Lumber Company could levy on the Thomas Woods property. Hood said that he would agree if he could obtain the permission of a certain Mississippi bank which had discounted the accounts payable from Thomas Woods Corporation to Caromiss. Gordy and Hutchison proposed to pay Hood a "premium" for Hood's obtaining this extension of credit. In his deposition, Hutchison related the following conversation:

"`I E. S. Gordy tell you what I will do.\' He said, `We will guarantee that account. You release us and we will give you a bonus out of our profit, in the form of profits and dividends in Thomas Woods, double or nothing. In other words, if we can collect any money, we will give you half of it up to $25,000.00. If we don\'t collect any, you won\'t get a cent.\' And Hood said, `I am as good a gambler as you are. I will take the deal.\' And that was the conception of this $25,000.00." (Emphasis supplied.)

As Hutchison explains, the proposition was advantageous to both Gordy Homes, Inc., and Hood. On the one hand, Hood had a better chance of getting paid for the lumber because Gordy Homes, Inc., was prosperous and Thomas Woods Corporation was struggling. As for Thomas Woods Corporation, it could now obtain permanent mortgaging because the threat of mechanics liens was averted.

In many respects Hood's testimony corroborates Hutchison's account of the negotiations. Hood testified that on October 26, 1952 the...