McDonald v. Haughton

• Decision Date: 31 January 1874
• Citation: 70 N.C. 393
• Court: North Carolina Supreme Court
• Parties: JOHN A. MCDONALD v. L. J. HAUGHTON.

70 N.C. 393

JOHN A. MCDONALD

v.L. J. HAUGHTON.

Supreme Court of North Carolina.

January Term, 1874.

Courts of justice not only redress fraud, but seek to redress fraud by removing temptation.Therefore Presidents and Directors of Railroad Companies are not allowed to buy up and speculate upon claims against such companies-- such contracts being in every respect against good morals, and consequently against public policy.

CIVIL ACTION, tried before his Honor, Judge Tourgee, at the Fall Term, 1873, of CHATHAM Superior Court.

In his complaint, the defendant alleges, that the defendant having a claim against the Western Railroad Company, amounting to $2,715.25, assigned it to him by the following instrument:

“January 21st, 1870.

I hereby transfer my claim against the Western R. R. Co., to John A. McDonald in consideration of his note for twenty-five hundred dollars; if said note is not paid by the 25th of February next, then the above to be null and void and of no effect.

+---------------------------+
                ¦(Signed,)¦L. J. HAUHGTON.” ¦
                +---------------------------+
                

The execution of this assignment was admitted by defendant.It was also admitted, that the defendant was the owner of a claim against said road for $2,715, with interest from Feb. 1, 1864, and that the plaintiff, from 12th November, 1869, to April, 1871, was a director in said Railroad Company.

The defendant, in his answer principally relies upon the facts, that the contract to pay the plaintiff the excess over $2,500, (the real amount involved in this action,) was without consideration; and that said contract, with a director of the company, was against public policy; and that the assignment was obtained from him by the false and fraudulent representations of the plaintiff himself.

For the plaintiff, the Secretary of the Company stated, (reading from the records of the Company,) that on 13th Nov., 1869, the plaintiff being present in the meeting, a resolution was adopted, appointing T. A. Byrnes, J. W. Hopkins and T. S. Lutterloh, a committee to investigate the claim of the defendant and others, held by them against the company,--the committee to report at the next meeting; that this committee reported the 6th of January, 1870, in favor of paying the claim of defendant, to-wit: $2,715, with interest from 1st February, 1864, the consideration of which report was postponed, until the meeting to be held in Raleigh on 1st February, 1870, when it was concurred in, (plaintiff being present) and the amount, including interest, ordered to be paid; that the books show that the amount was placed to the credit of the defendant.

The plaintiff, as a witness, stated, that in the early part of February, 1870, he had a conversation with defendant, in Pittsboro', in which he asked defendant, if he had heard that his claim against the Western Railroad Company, had been allowed; defendant stated that he had; that after this, he, the plaintiff, met the defendant in Fayetteville, sometime previous to 25th of February, 1870, and remarked to him: “I suppose you have received your money from the company;” that defendant replied, “I have got a part.”

Upon his cross examination, the plaintiff stated that he was not certain, that this conversation took place previous to the 25th of February, but it was his impression, that it did.That when the defendant gave him the assignment, hereinbefore set out, he, the plaintiff gave him his note for $2,500, due 25th February, 1870, and that the only conditions of the contract, were those expressed in the assignment.

The defendant, as a witness in his own behalf, testified, that the amount of his claim against the company, was paid him on the 18th March, 1870, at the banking-house of Jones & Lutterloh, in Fayetteville; that he received the money from the bank, and was certain as to the date, from the entry in his pass-book; and that the amount paid him was $3,715, the same being principal and interest of his claim.That the plaintiff was not present, nor has he ever received one dollar from the plaintiff.

The defendant further stated, that at the time he gave the assignment to the plaintiff, the plaintiff gave him his note for $2,500, and that the note, by its express terms, was to be null and and void, if not paid on or before the 25th of Feb. 1870, and that at the time he took the plaintiff's note conditioned as above, the plaintiff was notoriously insolvent, and has so continued ever since.That shortly after the 25th of Feb., 1870, he put plaintiff's note in his pocket, and went to Pittsboro' for the purpose of handing it to plaintiff; that he did not see him, and the note with other papers was lost; that he had diligently searched for it, as he relied upon the condition contained in the same, for a part of his defence set out in his answer, and had therein offered to indemnify the plaintiff from any damage or loss he might sustain on account of such loss; that after the day of payment, the 25th of February passed, he considered the note of no value; that he had received a notice from the plaintiff to produce it, &c.

Defendant, then, for the purpose of showing, that the contract (or assignment) made with plaintiff, was against public policy and fraudulent, offered to prove by himself, the following facts:

That on the 19th January, 1870, the plaintiff and himself being in the city of Raleigh, the plaintiff came to his boarding house, and asked him what he was going to do with his, (defendant's) railroad claim; that he, (the defendant) replied, “if he did not get his money very soon, he intended to sue on it;” that plaintiff remarked, “he hoped defendant would not sue the company;” that he again stated to plaintiff, he should certainly sue if the money was not paid, and that he had been advised by his lawyers to pursue this course.The plaintiff thought the matter could be compromised, and upon being asked how, replied, that he thought he could get $2,500 for it in a short time.That he(the defendant) stated to plaintiff, he would not take $2,500, as the principal itself, without interest, was $2,715, to which plaintiff said, “that I could not possibly get the interest, the Board of Directors were determined not to pay interest on any claim;” that to this, he, (the defendant) replied, “he thought it strange, that the Board should pay the principal and refuse to pay interest,” and asked the plaintiff what would become of the $215, if the proposition to receive $2,500 was accepted?Plaintiff replied, “well you will have to give that to Byrnes, who was Chairman of auditing committee, to get him to pass upon your claim.”Defendant said he thought it strange the Board would keep a man in office who would not pass a just claim unless he was paid for it, and that as the plaintiff helped to put him into office, he ought to help to put him out.To this, plaint...