McNair v. Southern States Finance Co.

• Decision Date: 12 May 1926
• Docket Number: 430.
• Citation: 133 S.E. 85,191 N.C. 710
• Parties: McNAIR v. SOUTHERN STATES FINANCE CO. et al.
• Court: North Carolina Supreme Court

133 S.E. 85

191 N.C. 710

McNAIR v. SOUTHERN STATES FINANCE CO. et al.

No. 430.

Supreme Court of North Carolina

May 12, 1926

Appeal from Superior Court, Scotland County; McElroy, Judge.

Action by John F. McNair against the Southern States Finance Company and others. From a judgment for plaintiff against defendant named, the latter appeals. No error.

Where agency of party making false representations was established by evidence aliunde, testimony as to his admissions of agency was competent.

The plaintiff brought an action against the Southern States Finance Company (hereafter called finance company) and the other defendants. At the close of the plaintiff's evidence the court below ordered that the action against the individual defendants be nonsuited. The present controversy on appeal is solely between the plaintiff and defendant finance company.

The plaintiff's action against the finance company is for actionable fraud. The material allegations of the complaint are:

"On May 9, 1923, at Laurinburg, N. C., the defendant corporation, through J. J. Quinby, signed a contract of sale for 4,000 shares of common stock in the Southern States Finance Company for the sum of $10,000, with James L. McNair, the agent and representative of plaintiff, who acted in said transaction for and in the name of the plaintiff; said contract was not in the form, nor did it contain the provisions, required by the laws of North Carolina.

"On May 12, 1923, the defendant corporation, by the defendant J. R. Cherry, as secretary and treasurer, drew upon plaintiff for $10,000 as the purchase price agreed upon for said stock, which said draft was paid.

"The sale of said stock to the plaintiff was conducted upon plaintiff's behalf entirely through his agent, James L. McNair, and the circumstances of said transaction were as follows:

"The defendant Quinby, approached the said agent of plaintiff, and represented and stated to him that the Southern States Finance Company was a new corporation then being organized by Tom G. Taylor & Co. for the Finance Co.; that none of its common stock had been sold or disposed of, or would be sold or disposed of, for less than $2.50 per share; that all provisions of law with reference to organization and sale of stock had been complied with, and no greater amount had been used, or would be used, in organization, promotion, and sales expense than allowed by law, and contracting and agreeing that, in the event of his failure to dispose of said stock, at a large profit to plaintiff, within six months, plaintiff would be repaid the sum of $10,000, with interest

from May 9, 1923, each of which representations and statements was false to the knowledge of said Quinby and his codefendants; the truth being, as defendants well knew, that the Southern States Finance Company had been duly organized for more than two years, that large quantities of its common stock had been given away as bonus, and sold at prices much less than $2.50 per share; said corporation was not a new company, being organized by Tom G. Taylor & Co., and greatly in excess of the amount allowed by law had been expended and was being expended in stock sales, organization, and promotion expense.

"Said stock was practically worthless, and still is practically worthless. The statute constituting the Blue Sky Law of North Carolina (C. S. § 6363 et seq.) had not been complied with. The stock was not resold to the profit of the plaintiff, and on his demand the defendant corporation failed to take up said stock and repay to him the purchase price, with interest thereon. All of aforesaid representations were made with knowledge of their falsity, with intent to deceive, and actually did deceive, the plaintiff through his said agent, and caused him to purchase said stock."

The defendant finance company denied any fraud in the transaction; denied that it had not complied with the blue sky statutes of the state; and alleged: That on or about May 9, 1923, plaintiff, John F. McNair, by J. L. McNair, his agent, executed and delivered to Tom G. Taylor a certain written contract for the purchase of 4,000 shares of the common stock of the corporate defendant, for which he contracted and agreed to pay the sum of $10,000, 40 per cent. of which was to be paid, and the remaining 60 per cent. in notes, bearing 6 per cent. interest, payable to the Southern States Finance Company, and due respectively in three, six, and nine months after date thereof; that in the said written contract as aforesaid it was specifically set forth in part, and expressed as follows: "It is understood and agreed that this contract contains the entire agreement between the purchaser, whose signature appears below and Tom G. Taylor & Co., and no agent, representative, or any other person has any power to change, modify, or make any new conditions, statements, promises, or agreements whatever." That J. J. Quinby, mentioned by plaintiff, was not an agent of corporate defendant, or of said Tom G. Taylor, nor was said J. J. Quinby authorized to make any representation or contract in regard to or binding upon defendants, and defendants have and had no knowledge of any alleged act or thing done or said by said Quinby, and are not liable thereon. That defendants are advised and believe that plaintiff is bound by terms of written contract of purchase before mentioned, and is estopped to deny the terms thereof or controvert same by oral testimony, and defendants specifically plead such estoppel in bar of any recovery herein.

The issues submitted to the jury and their answers thereto were as follows:

"(1) Did the plaintiff, on the 9th day of May, 1923, subscribe for 4,000 shares of stock in the Southern States Finance Company for the sum of $10,000, and pay for the same on the 13th day of May? Answer: Yes.

"(2) Was such subscription procured, by means of misrepresentation and fraud, as alleged in the complaint? Answer: Yes.

"(3) At the time of said sale was the Southern States Finance Company duly licensed to sell stock in the state of North Carolina? Answer: No.

"(4) Did the subscription card signed by the plaintiff contain the language required by section 6367 of the Consolidated Statutes? Answer: No.

"(5) Did the defendant Tom G. Taylor make the sale of said stock through his agent, J. J. Quinby? Answer: Yes.

"(6) Was the said J. J. Quinby, at the date of sale to plaintiff, a duly licensed agent to sell said stock under the laws of North Carolina? Answer: No.

"(7) Is the defendant Southern States Finance Company indebted to plaintiff, and, if so, in what amount? Answer: $10,000 from May 13, 1923."

Judgment was rendered on the verdict, and the finance company appealed to the Supreme Court. There are 37 assignments of error in the record. Most of the immaterial ones, under the rules of this court, are abandoned in the finance company's brief. The material ones and necessary facts will be considered in the opinion.

Frank Armfield, of Concord, and T. L. Kirkpatrick, Plummer Stewart, and H. L. Taylor, all of Charlotte, for appellant.

James A. Lockhart, Preston & Ross, and Hueling Davis, all of Charlotte, and W. H. Weatherspoon, of Laurinburg, for appellee.

CLARKSON J.

Succinctly, the main material contentions of plaintiff and defendant the finance company are: On the part of plaintiff: That prior to May 9, 1923, J. J. Quinby came to James L. McNair, and represented that he was agent of Tom G. Taylor, who was the duly appointed agent of the finance company to organize to sell its preferred and common stock. James L. McNair entered into the negotiations with Quinby, and purchased the stock on May 9, 1923, for his father the plaintiff. The false and fraudulent representations which he relied on, and which induced him to purchase the 4,000 shares of common stock of the company, are: (1) That it was a new corporation then being organized by Tom G. Taylor & Co.; (2) that none of the common stock had been sold or disposed of or would be sold or disposed of for less than $2.50 per share; (3) that all the provisions of law with reference to organization and sale of stock had been complied with; (4) contracting and agreeing that, in the event of his failure to dispose of the stock at a large profit, within six months, plaintiff would be repaid the sum of $10,000, with interest from May 13, 1923; (5) all of the representations made by Quinby, agent of finance company, were false, with knowledge of their falsity, with intent to deceive, and actually did deceive, plaintiff, and he was thereby induced to buy the stock. That plaintiff offered frequently to return the stock as soon as he discovered the fraud, and demanded the payment of the purchase price and interest. Plaintiff's evidence abundantly tended to support these contentions.

On the part of defendant finance company: (1) The finance company admitted the contract for the purchase of 4,000 shares of the common stock was executed on May 9, 1923, by Jas. L. McNair for plaintiff, denied all allegations of fraud; that the books of the corporation show there was no fraud, and that any representation made was true. (2) That in the agreement of purchase of the stock by the plaintiff was the following: "It is understood and agreed that this contract contains the entire agreement between the purchaser, whose signature appears below and Tom G. Taylor & Co., and no agent, representative or any other person has any power to change, modify or make any new conditions, statements, promises or agreements whatever." (3) That J. J. Quinby was not the agent of the finance company or Tom G. Taylor, and was not authorized to make any representation or contract binding on finance company, and it had no knowledge of any alleged act or thing done or said by...