Park Terrace v. Phoenix Indem. Co.

• Decision Date: 04 February 1955
• Docket Number: No. 741,741
• Citation: 241 N.C. 473,85 S.E.2d 677
• Court: North Carolina Supreme Court
• Parties: PARK TERRACE, Inc. v. PHOENIX INDEMNITY COMPANY (Origlnal Defendant) and Park Builders, Inc. (Additional Defendant).

Page 677

85 S.E.2d 677

241 N.C. 473

PARK TERRACE, Inc. v. PHOENIX INDEMNITY COMPANY (Origlnal Defendant) and Park

Builders, Inc. (Additional Defendant).

No. 741

Supreme Court of North Carolina.

Feb. 4, 1955

Brooks, McLendon, Brim & Holderness, Greensboro, for original defendant-appellant, and Womble, Carlyle, Martin & Sandridge, Winston-Salem, and Broaddus, Epperly & Broaddus, Martinsville, Va., for additional defendant-appellant.

Spry & White and Dallace McLennan, Winston-Salem, for plaintiff-appellee.

BARNHILL, Chief Justice.

There was no error in the order of the court below declining to strike the quoted excerpt from the further answers of the defendants. It was the duty of the architect in charge to exercise general supervsion of the construction of the buildings contemplated by the building contract for the purpose of determing whether the builder was furnishing the type of building material and constructing the buildings in accordance with the plans and specifications. Consequently, the defendants will have the right to offer competent evidence in support of the allegation. Hence, inclusion of said allegation is neither irrelevant nor immaterial.

The appellants discuss in their brief the alleged error of the court below in declining to make McLean a party defendant. But there is no exception to sustain this assignment. Upon the signing of the order from which the defendants appealed, they elected to particularize their objections to the order in the following language: 'The defendants * * * each excepts separately to so much of the foregoing order as strikes paragraphs 2 and 3 of their respective further answers and defenses, and the judgment entered, and each appeals to the Supreme Court.' Thus the defendants, at the time, elected to direct their attack upon the order to so much thereof as struck paragraphs 2 and 3. They did not except to the refusal of the court to make McLean a party defendant. Currie v. Malloy, 185 N.C. 206, 116 S.E. 564. And, in any event, the refusal of the court to make McLean a party defendant was well advised. The purchase of the outstanding common stock from the then owners thereof was by McLean as an individual. He signed the socalled release as an individual. Hence, these defendants may not be permitted to try any action they may have against McLean in this suit.

The so-called release executed at the time and as a part of the contract of purchase and sale was executed by the then owners as parties of the first part and by McLean as the party of the second part, as individuals. Neither the vendors nor the vendee purported to act for the corporation.

While it is alleged that McLean, in executing the release, 'was acting in behalf of and as agent of the plaintiff; that he had authority to so act and that the plaintiff, as principal, is bound by the acts of the said Malcolm P. McLean, Jr., in executing and delivering said contract to Park Builders, Inc.,' the other specific facts alleged completely refute this allegation and make it nothing more than a conclusion. At the time McLean signed the release contract, he was not a stockholder, director, or officer of plaintiff corporation, and there is no allegation that he was an employee possessing any authority whatsoever to act in behalf of plaintiff.

Since McLean, in executing the release contract, did not purport to act as an agent of plaintiff, the question whether he had authority to act in behalf of that corporation does not arise. That question does not arise until and unless he professes to contract for and in behalf of his alleged principal. General Air Conditioning Co. v. Douglass, 241 N.C. 170, 84 S.E.2d 828.

A corporation is bound by the acts of its stockholders and directors only when they act as a body in regular session or under authority conferred at a duly constituted meeting. 'As a rule authorized meetings are prerequisite to corporate action based upon deliberate conference and intelligent discussion of proposed measures.' O'Neal v. Wake County, 196 N.C. 184, 145 S.E. 28, 29; Tuttle v. Junior Building Corp., 228 N.C. 507, 46 S.E.2d 313, and cases there cited.

'The separte action, individually, without consultation, although a majority in number should agree upon a certain act, would not be the act of the constituted body of men clothed with corporate powers.' Angel & Ames on Corporations, sec. 504. 'Indeed, the authorities upon this subject are numerous, uncontradicted, and supported by reason.' Duke v. Markham, 105 N.C. 131, 10 S.E. 1017; Tuttle v. Junior Building Corp., supra, and cases there cited; 13 A.J. 465; 3 Fletcher, Cyc. of Corporations, 2917; Ballentine, Manual of Corporation Law and Practice, 591.

It is apparent that at the time McLean acquired the stock of plaintiff corporation, the vendors were under the impression they might be liable individually in an action for breach of the building contract and were seeking to protect themselves against a suit for such breach. It would seem, therefore, that the release contract was made a part of the purchase and sale of the stock primarily for the protection of the vendors. In any vent, the action of McLean in becoming a party to said contract was not binding upon plaintiff corporation. Whether Park Builders, Inc. has a cause of action against the vendors of the stock under said release contract will be determined by the verdict and judgment in this cause. If plaintiff recovers herein, Park Builders, Inc. may then assert its rights, if any, under said release contract.

McLean is not a necessary party to this action. The rights of plaintiff may be fully litigated without making him either a party plaintiff or defendant. The action of the court in declining to make him a party defendant cannot be held for error. The motion of the defendants for leave to amend their answers was interposed for the purpose of making allegations against McLean. Since McLean was not made a party, the motion to amend is clearly without merit. In any event, it was a matter of discretion resting in the presiding judge. His action in declining to grant leave to amend is not reviewable. Hooper v. Glenn, 230 N.C. 571, 53 S.E.2d 843; Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Goode v. Barton, 238 N.C. 492, 78 S.E.2d 398.

Query: Since McLean has acquired all the stock of plaintiff, is it now a corporation? This question is not presented by this record.

The judgment entered in the court below is

Affirmed.

BOBBITT, Justice (dissenting).

In considering plaintiff's motion to strike, we deal with the facts alleged.

On 15 February, 1951, Pollard, Burge and Lester owned 199 shares of plaintiff's common stock. Bolich owned the remaining 101 shares. Pollard, Burge and Lester owned common stock of defendant Park Builders, Inc. They were interested, as stockholders, in both corporations. This was the state of affairs when McLean purchased the 199 shares from Pollard, Burge and Lester, and the 101 shares from Bolich.

The release was signed by McLean. It was executed as recited therein, 'as a part of the consideration for the purchase of said stock.' It provides that McLean 'accepted the real estate and all improvements located thereon * * * owned by the corporation in its present condition.' The release, by its terms, is in favor of defendant Park Builders, Inc., as well as in favor of Pollard, Burge and Lester.

On 15 February, 1951, claims, if any, against Park Builders, Inc., 'of any nature whatsoever because of defective workmanship, defective or inferior building materials in the structures located on said premises,' vested in Park Terrace, Inc., the plaintiff. When McLean purchased the 199 shares of common stock in plaintiff he agreed, as expressly provided in the release, that no claim of this nature would be made against Park Builders, Inc.

The plaintiff, a corporate entity, neither received nor gave a consideration. But McLean became its sole common stockholder in consideration of his execution of the release. It is clear that McLean individually is precluded by his express agreement from asserting any claim against defendant Park Builders, Inc., or the surety on its bond, or Pollard, Burge and Lester, of any nature whatsoever because of defective workmanship or defective or inferior building materials in the structures located on said premises. The question for decision is whether, upon the facts alleged, Park Terrace, Inc., can assert such claims.

It is alleged that on 15 February, 1951, McLean became, and presently is, the owner of said 300 shares, the entire common stock of plaintiff; and that the only other stock outstanding is the 100 shares of preferred stock, having a par value of $1.00 per share, owned by the Federal Housing Administration.

The release is pleaded as a bar to plaintiff's action. The case has been presented as turning upon the question as to whether the release is to be considered the contract of the plaintiff, the contention being that McLean acted as agent for the plaintiff and by virtue of his authority as sole common stockholder. However, we consider the facts as alleged; and it is for this Court to pass upon the legal significance of the allegations. In so doing, we approach the question not to determine whether the release is in fact or in law the corporation's contract but rather to determine whether McLean can maintain under the guise of a corporation...