Olin Mathieson Chemical Corp. v. Planters Corp., 17651

Decision Date04 May 1960
Docket NumberNo. 17651,17651
Citation114 S.E.2d 321,236 S.C. 318
PartiesOLIN MATHIESON CHEMICAL CORPORATION, Plaintiff-Respondent, v. PLANTERS CORPORATION, John K. Massey, James P. McAlpine, and T. L. Benson and R. G. Horton, as Trustees for Planters Corporation, Defendants, of whom John K. Massey Is, Appellant.
CourtSouth Carolina Supreme Court

Burroughs & Green, Suggs & McCutcheon, Conway, for appellant.

McCaskill & Thompson, Conway, for respondent.

MOSS, Justice.

It appears from the record in this case that Olin Mathieson Chemical Corporation, the respondent herein, did, on February 17, 1956, enter into a written contract with Planters Corporation of Conway, South Carolina, wherein such corporation was appointed a dealer to sell irrigation equipment furnished by the respondent. It was agreed that such irrigation equipment would be shipped to the corporation on consignment and legal title thereto was retained by the respondent. The contract also provided that Planters Corporation would have the right to sell said equipment and the proceeds derived from such sales was to be deemed the property of, and to be held in trust by Planters Corporation, for the account ofthe respondent.

The complaint alleges that pursuant to the terms of the aforementioned contract, the respondent furnished to Planters Corporation numerous items of equipment, and that the said corporation disposed of all the said equipment furnished by the respondent and did not pay over the proceeds from the sale of said equipment to the respondent. It is further alleged that Planters Corporation was duly organized as such under the laws of South Carolina, and that James P. McAlpine and John K. Massey are the sole directors and stockholders thereof, with McAlpine serving as president, and Massey as vice-president, secretary and treasurer. The complaint further alleges that Massey and McAlpine, as officers, directors and stockholders, did willfully and negligently handle and intermingle the funds received from the sale of the consigned equipment, which belonged to the respondent, with the funds of the corporation, and did use such for the benefit thereof. It further appears that Planters Corporation did, on February 2, 1957, pursuant to Section 57-351 et seq., 1952 Code of Laws of South Carolina, make an assignment to T. L. Benson, in trust, for the benefit of its creditors. This assignment was executed on behalf of Planters Corporation by James P. McAlpine, President, and by John K. Massey, as Secretary. It further appears that R. G. Horton was elected as agent of the creditors.

This action was instituted by the respondent against the Planters Corporation, John K. Massey, James P. McAlpine, and T. L. Benson and R. G. Horton, as trustees for said corporation. As to the defendants Benson and Horton, it was alleged that the corporation had made an assignment for the benefit of the creditors and the trustees appointed in connection therewith had refused to make payment of the claim of the respondent. As is heretofore stated, the complaint alleges a sale by the respondent of irrigation equipment to the corporation, on consignment, the disposition thereof by the corporation and its failure to make payment for said equipment, or to comply with the provisions of the consignment agreement. The respondent sought to hold McAlpine and Massey personally liable on the ground that they were the sole stockholders, officers and directors of Planters Corporation, and had willfully and negligently handled the funds received from the sale of the consigned equipment, and had intermingled said funds so received with general corporation funds, and had disbursed it as such.

All of the defendants filed answers in the action. In order to dispose of this appeal, it is only necessary to refer to the answer of John K. Massey, the appellant herein. He admitted that he was a stockholder and director of Planters Corporation, and was vice-president, secretary and treasurer thereof. He alleges that he did not know of the contract or agreement made by McAlpine, the president of the corporation, with the respondent. He asserts that the management and operation of Planters Corporation was handled by James P. McAlpine, the president thereof. He further asserts that he was not guilty of negligence or willfulness in permitting McAlpine to manage and operate the business. He further answered that at no time did he negligently and willfully handle or intermingle any of the funds derived from the sale of the consigned property with the funds of the corporation. He asserts that he is not personally liable to the respondent.

This case came on for trial before the Honorable Claude M. Epps, Judge of the Civil Court of Horry County, and a jury. At the conclusion of the evidence in behalf of the respondent, a verdict was directed in favor of T. L. Benson and R. G. Horton, as trustees for the corporation. The issue of punitive damages was eliminated by the trial Judge. The defendants offered no testimony. A motion was made by all other defendants for a directed verdict. As to John K. Massey, the appellant herein, a motion for a directed verdict was made on the ground that the evidence was insufficient to establish negligence or dereliction of duty on his part in handling or intermingling the funds of the respondent with the funds of Planters Corporation, so as to render him personally liable therefor. The respondent moved for the direction of a verdict in its favor against Planters Corporation, Massey and McAlpine. A verdict was directed in favor of the respondent against Planters Corporation and McAlpine for $2,054.33, being the amount due by the corporation upon the consignment contract. The Court refused the motion of John K Massey, the appellant herein, and also the motion of the respondent for a directed verdict against him. The trial Judge submitted to the jury the issue of whether the appellant, John K. Massey, had been guilty of negligence in the handling of the funds that represented the sale of the property that was consigned to the corporation by the respondent. The jury returned a verdict in favor of the respondent against the appellant. Thereafter, the appellant moved for judgment non obstante veredicto, and in the alternative for a new trial, on the ground that there was no evidence requiring the submission to the jury the issue of the negligence of the appellant or his personal liability to the respondent. This motion was refused and this appeal followed.

The first question for determination is whether there was error on the part of the trial Judge in refusing to hold that the respondent had failed to show that the appellant was guilty of negligence or mismanagement of the funds derived from the sale of the consigned equipment. The appellant asserts that the evidence was insufficient to establish negligence or dereliction of duty on his part in intermingling of the funds received from the sale of the consigned equipment with the funds of Planters Corporation.

Planters Corporation was chartered in January, 1953. James P. McAlpine and John K. Massey were the sole stockholders, directors and officers thereof. It was thus a 'close corporation' in the popular sense of that term. Industrial Equipment Co. v. Montague, 224 S.C. 510, 80 S.E.2d 114.

The consignment contract entered into by the respondent with Planters Corporation was executed on behalf of the corporation by James P. McAlpine, its president. The answer of the appellant does not question the validity of such contract, nor does he assert that the president had no authority to enter into the said contract and, thereby, bind the corporation. By his answer, he asserts that he did not know of the contract nor did he personally have any part in making same. The appellant asserts that the management and operation of the business of the corporation was handled by James P. McAlpine. It thus appears that McAlpine, the president of the corporation, was its chief executive officer and active manager of the business. The contract made by him for Planters Corporation with the respondent was valid and binding.

It is an admitted fact that Planters Corporation sold the consigned equipment, collected the sales price thereof, and intermingled such funds with the funds of the corporation. It is also an admitted fact that Planters Corporation never paid over the funds received for the sale of the consigned equipment to the respondent. The record also shows that at the time the Planters Corporation made an assignment for the benefit of its creditors, that it had sold all of the respondent's equipment held on consignment and had no moneys on hand or in the bank at the time of such assignment, and that all of its funds, including the trust fund belonging to the respondent, had been disbursed by, and in behalf of, Planters Corporation.

It appears from the evidence that the district manager of the respondent went to Conway in December, 1957, to discuss with McAlpine and Massey the account here involved. He testified that McAlpine admitted that the consigned equipment had been sold and that the funds derived from such sales should have been turned over to the respondent. We quote from the testimony:

'Q. Did Mr. McAlpine state that he hadn't paid it? A. Yes, but he wanted to make arrangements.

'Q. Did you go into a discussion of the contract? A. Yes.

'Q. Did he understand it? A. He agreed that the stuff was on consignment and he should have handled it differently, and turned over what he got for it to us.

'Q. Did Mr. Massey look at it? A. I don't remember, but he was there.

'Q. He heard you all discuss it? A. Yes.

'Q. Did he indicate what he had done with the funds? A. Used them in the business. He just said it was sold.'

Upon cross-examination, the following testimony was given:

'Q. Didn't Mr. Massey tell you at that time he didn't know anything about this matter? A. He indicated that he didn't know as much as Mr. McAlpine.

'Q. You ...

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