Palomino Mills v. Davidson Mills Corp.

Decision Date20 April 1949
Docket Number377
CourtNorth Carolina Supreme Court

Civil action to recover $10,665, with interest, as damages resulting from alleged false and fraudulent representation by which plaintiff was induced to purchase certain personal property,--heard upon petition of corporate defendant for removal to District Court of the United States for the Middle District of North Carolina for trial, upon ground of alleged fraudulent joinder.

Plaintiff alleges in its complaint these pertinent facts: (1) That it is a corporation organized and existing under the laws of North Carolina, with its principal office in Rowan County,--its name having been changed in September 1947 from Davidson Cotton Mills Company to 'Palomino Mills, Inc.'; (2) that (a) the defendant Davidson Mills Corporation is a Delaware corporation, with one of its principal offices located in the city of Concord, North Carolina, with C. W. Byrd as an officer, to wit, its president, (b) that C. W. Byrd is a resident of Concord North Carolina, and (c) that Henry Rose and Herbert Stein are stockholders, officers and directors of said Davidson Mills Corporation, and both are residents of the city of New York State of New York, as plaintiff is informed and believes; (3) that on or about 5 March, 1947, plaintiff purchased, through Henry Rose, from Davidson Mills Corporation, C. W. Byrd president, by bill of sale (Copy of which is attached to, and asked to be made a part of the complaint as fully as if written therein), certain personal property itemized and listed in Exhibit A attached to said bill of sale.

The bill of sale so attached to the complaint reads as follows:

'Bill of Sale

'North Carolina

'Mecklenburg County

'Know All Men by These Presents that Davidson Mills Corporation, a Delaware corporation with an office and place of business in the Town of Davidson, Mecklenburg County, North Carolina, has this 5th day of March 1947, in consideration of One Hundred ($100.00) Dollars and other valuable considerations, to it paid by Davidson Cotton Mills Company, a North Carolina corporation with its principal office and place of business in Salisbury, Rowan County, North Carolina, has bargained sold and delivered to said Davidson Cotton Mills Company the personal property listed on the attached exhibit marked Exhibit A, consisting of merchandise inventories of Davidson Mills Corporation on hand as of the close of business on February 28, 1947;

'To Have and to Hold the same unto the said Davidson Cotton Mills Company, its successors and assigns, and Davidson Mills Corporation hereby warrants the said property to be free from any and all encumbrances and does warrant the title thereby given to be good and indefeasible.

'In Testimony Whereof, Davidson Mills Corporation has caused this Bill of Sale to be executed by its duly authorized officers and its corporate seal to be hereto affixed, the day and year first above written.

'Davidson Mills Corporation,
'By: C. W. Byrd, President.


'C. A. Potts, Secre- (Corporate Seal).'


And Exhibit A reads as follows:

'Exhibit A

54,120 # White Cotton @ .2902- $15,705.62

18,589 # Cleaned Cotton @ .2984 5,546.96

148,227 # Dyed Cotton @ .3563 52,813.28
800 # Dyed Cotton @ . 35 280.00
1,093 # Ground Waste @ . 03 32.79

69,336 # Work inProcess @ . 50 34,668.00

Dyes & Chemicals 9,032.89

Supplies 9,371.84



(4)that line three of said Exhibit A called for 148,227 pounds of dyed cotton at .3563 per pound, amounting to $52,813.28; (5) 'that on the 5th day of March, 1947, the defendants, C W. Byrd, Henry Rose and Herbert Stein, being officers and directors of the Davidson Mills Corporation, in order to induce the plaintiff to purchase the bill of goods set out in Exhibit A, falsely and fraudulently represented to the plaintiff that the said 148,227 pounds was dyed cotton; that the plaintiff relying upon said representation, bought from the defendants the said 148,227 pounds which they had fraudulently represented to it to be dyed cotton at the price of .3563 per pound, and paid the defendants for the same the sum of $52,813.28; and that 100 bales of said merchandise purchased from the defendants was not dyed cotton but was of a quality greatly inferior, which was known as dyed waste or 'frog hair,' as the defendants then well knew, to the plaintiff's damage in the sum of approximately $7800'; and 'that said defendants further falsely and fraudulently represented to plaintiff and to W. F. McCanless, officer of plaintiff, that certain colored yarn in the inventory of merchandise (dyed cotton) bought by plaintiff from defendants was sold to Sure-Fit Products Company at 84¢ per pound, when in truth and in fact it was not sold and plaintiff sustained a loss of $2720.00.' Thereupon plaintiff prayed judgment against the defendants, and each of them, in the sum of $10,665, together with interest and costs, etc.

The defendant Davidson Mills Corporation, appearing specially for the purpose, and in apt time, filed its verified petition, with bond for removal of the cause to the District Court of the United States for the Middle District of North Carolina for trial upon the ground of an alleged fraudulent joinder--alleging, among other things, the following:

'7. That the plaintiff has wrongfully and fraudulently joined as a co-defendant with your petitioner, C. W. Byrd, who is immaterial, unnecessary and an improper party to this controversy * * * one wholly between * * * the plaintiff, a citizen and resident of the State of North Carolina * * * and the petitioner, a citizen and resident of the State of Delaware and a non-resident of the State of North Carolina;

'8. That C. W. Byrd * * * had nothing to do with the sale of the cotton mill and other assets connected therewith sold by this petitioner to the plaintiff and its predecessors in interest; that the said C. W. Byrd never owned, and does not now own, any stock of this petitioner; that he had nothing to do with the planning the sale by this petitioner of its cotton mill and other assets and did not know that any sale was contemplated until he was advised by Henry Rose, the chairman of the board of directors of this petitioner, that a sale had been made; that as a matter of fact, the sale by this petitioner was carried out pursuant to an agreement entered into on January 31, 1947, between this petitioner and W. F. McCanless, the president of the plaintiff in this action; that said sales agreement was entered into in the city of New York when C. W. Byrd was not present and knew nothing of negotiations pertaining to said sale; that the sales agreement was signed on behalf of this petitioner by Henry Rose, chairman of the board, and by W. F. McCanless; that the said agreement provides for the transaction to be closed and the deed to be delivered and any other instruments of conveyance that may be proper or necessary to be delivered upon payment of the purchase price in Charlotte, North Carolina, on March 5, 1947; that C. W. Byrd never, at any time, made any representation to W. F. McCanless, or any of his associates, pertaining to any of the assets being sold by this petitioner and was not present when any negotiations took place; that on March 5, 1947, pursuant to the terms of the sales agreement, dated January 31, 1947, a meeting took place in Charlotte, North Carolina, and at that time, W. F. McCanless, in writing, assigned a part of his interest in the purchase agreement to Davidson Cotton Mills Company, a North Carolina corporation; that the purchase price having been paid to this petitioner, the board of directors of this petitioner directed C. W. Byrd, in his capacity as president of this petitioner, to sign the deed of conveyance and the bill of sale; that the said C. W. Byrd had no authority to make any sale of any assets of this petitioner and merely acted in accordance with instructions and directions given him by Henry Rose, chairman of the board of directors of this petitioner;

'9. That * * * any damages which the plaintiff received or incurred, as a result of said purchase and sale was neither the direct or proximate cause or result of any representations or inducements made by C. W. Byrd; that the rights of the real parties in interest to his controversy can be finally adjudicated without the presence of the defendant C. W. Byrd; that the...

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