Lee v. Shor

• Decision Date: 30 December 1970
• Docket Number: No. 7010SC561,7010SC561
• Citation: 178 S.E.2d 101,10 N.C.App. 231
• Parties: Ira D. LEE, d/b/a Lee Electrical Service v. Harry SHOR, Robert B. Broughton, Trustee, Englewood Development Corporation, Formerly Citizens Mortgage Corporation, and Bessie L. Shor, Wife of Harry Shor.
• Court: North Carolina Court of Appeals

Page 101

178 S.E.2d 101

10 N.C.App. 231

Ira D. LEE, d/b/a Lee Electrical Service v. Harry SHOR, Robert B. Broughton, Trustee, Englewood Development Corporation, Formerly Citizens Mortgage Corporation, and Bessie L Shor, Wife of Harry Shor.

No. 7010SC561.

Court of Appeals of North Carolina.

Dec. 30, 1970.

Harris & Harris by Jane P. Harris, Wake Forest, for plaintiff-appellant.

W. G. Parker, Raleigh, for defendant appellee Harry Shor.

Jack P. Gulley, Raleigh, for defendant appellee Englewood Development Corporation.

VAUGHN, Judge.

Summary judgment is proper only when the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Rule 56 North Carolina Rules of Civil Procedure. It is an extreme remedy and should be awarded only where the truth is quite clear. American Insurance Company v. Gentile Brothers Company, 109 F.2d 732 (5th Cir. 1940). 'Upon a motion for summary judgment it is no part of the court's function to decide issues of fact but solely to determine whether there is an issue of fact to be tried.' Toebelman v. Missouri-Kansas Pipe Line Co., 130 F.2d 1016 (3rd Cir. 1942). We hold that there are issues of fact to be tried in the present case and that summary judgment was improperly entered.

Transactions in the nature of the one under attack here are generally considered as follows:

'It is said that secured loan transactions between a corporation and its officers or directors are fundamentally suspect, and will be closely scrutinized by the courts; and that they must be open and free from fraud or impropriety. The officer or director making the loan must act in good faith, must be free from all suspicion, and may seek no unfair advantage or undue benefit--in short there must be no conflict in interest between the lender and the borrower. The terms of the loan must be fair and reasonable, and the loan itself must be for the corporation's benefit; a real need for the loan must have existed, and the funds obtained by the loan must be for use in the business of the corporation.

'In establishing the validity of a secured loan transaction between a corporate officer or director making the loan and the corporation furnishing the security therefor, The burden of proof of the lender's good faith and of the justice of the transaction rests upon the officer or director. * * *' (Emphasis Ours) 19 Am.Jur.2d, Corporations, § 1302, p. 709.

This has long been the law of this State:

'* * * (T)here would be nothing to hinder a director from loaning money and taking liens upon the corporate property as security for its repayment, and in enforcing his lien, provided it was an open and entirely fair transaction; But even then it would be looked upon with suspicion, and strict proof of its bona fides would be required. (Emphasis Ours)

'* * * (W)here a corporation is insolvent, its capital is a trust fund for the payment of its debts. A director creditor upon a debt theretofore existing cannot take advantage of his superior means of information to secure his debt as against other creditors.' Hill v. Pioneer Lumber Co., 113 N.C. 173, 174, 18 S.E. 107.

Upon a motion for summary judgment both the opposing and moving parties are entitled to any presumption that is applicable to the facts before the Court. Moore's Federal Practice, 2d Vol. 6, § 56.15(3), p. 2343.

With the exception of affidavits tending to show that on 3 December 1968 Harry Shor withdrew $30,000.00 from his personal account and that on the same date the funds were deposited in the bank account of the Corporation, all of defendants' affidavits were from the defendants and Gerald T. Shor. The fact that the witness is interested in the result of the suit has been held to be sufficient to require the credibility of his testimony to be submitted to the jury. Sonnentheil v. Christian Moerlein Brewing Co., 172 U.S. 401, 408, ...