Peoples Bank & Trust Co. v. Tar River Lumber Co.

• Decision Date: 18 March 1942
• Docket Number: 93.
• Parties: PEOPLES BANK & TRUST CO. v. TAR RIVER LUMBER CO.
• Court: North Carolina Supreme Court

19 S.E.2d 138

221 N.C. 89

PEOPLES BANK & TRUST CO. v. TAR RIVER LUMBER CO.

No. 93.

Supreme Court of North Carolina

March 18, 1942

Civil action in receivership heard upon claim of Ida Baker Hanes filed with, and denied by receivers.

In the trial court, upon hearing on exceptions of Ida Baker Hanes to report of receivers of defendant, Tar River Lumber Company, filed at September Term, 1941, in which they decline to approve her claim, represented by two notes of defendant for that same are barred by statutes of limitations, the parties stipulated that the judge should find all facts with the same effect as if determined by a jury and render judgment thereon.

Ida Baker Hanes offered in evidence these documents: 1. Two notes executed in name of Tar River Lumber Company, by W. L. Groom president; one, date March 18, 1924, payable to Ida Baker Hanes for $5,000, two years after date, with interest at 6% per annum, payable semi-annually; and the other dated August 4, 1926, payable to Howard E. Baker for $10,000 two years after date, with interest at 6% per annum, payable semi-annually, bearing on back this endorsement: "Pay to the order of Ida B. Hanes without recourse, First National Bank & Trust Company of Elmira, by O. N. Reynolds, V. P as Executor of the estate of Howard E. Baker, deceased."

2. Two letters, signed in name of "Tar River Lumber Company by S. T. Anderson", purporting to be on letterhead stationery of "Tar River Lumber Company, Inc., Wholesale and Retail Dealers in Kiln Dried North Carolina Pine, Poplar and Oak" showing as officers: "W. L. Groom, Pres and Gen. Mgr., S. T. Anderson, Secy. and Treas., W. T. Keeton, Vice Pres."

The first letter, dated Rocky Mount, N. C., Feb. 18, 1939, addressed to "Mr. M. D. Thompson, c/o First National Bank & Trust Company, Elmira, N.Y." reads as follows: "Complying with the request of Mr. I. T. Skeels, Assistant Vice President, we beg to herewith hand you copy of our annual financial statement as of Jan. 1st, 1939. If any explanation needed, we will be glad to give the best we can." Attached to and enclosed in this letter was a financial statement of all assets and liabilities of the Tar River Lumber Company as of January 1, 1939, the only pertinent part being "Liabilities" listed as "notes payable to stockholders, W. L. Groom $62,077.79, H. E. Baker, dec. $14,087.00, and Ida B. Hanes $6,205.20", total "$82,369.99".

The other letter, dated Rocky Mount, N. C., February 15, 1940, addressed to "Mr. George H. Wood, C. P. A., Pasadena, Calif.", reads as follows: "We acknowledge yours of February 7th with reference to $5,000.00 note held by Mrs. Ida B. Hanes. This note is included in our liabilities as shown by books. As to its value and time of payment, we are unable to advise. The writer does not feel you would be justified in considering income from this note for income tax returns."

The parties stipulated that on February 18, 1939, the First National Bank & Trust Company of Elmira, N.Y., was "the financial agent of Mrs. Ida Baker Hanes, and also a creditor of Tar River Lumber Company, or its subsidiary, Swansboro Land & Lumber Company".

The receiver offered evidence tending to show substantially these facts:

The Tar River Lumber Company, originally a co-partnership, composed of W. L. Groom, Howard E. Baker and J. H. Harris, was incorporated in 1908 by them and others, including Ida Baker Harris, daughter of Howard E. Baker, and S. T. Anderson, who owned two shares. Groom was elected president, Baker, treasurer, and Anderson, secretary. Subsequently, upon death of Baker, the offices of secretary and treasurer were combined, and Anderson was elected. Under the by-laws of the corporation, the president was empowered to exercise general supervision and direction over the affairs and all other officers of the corporation. The by-laws, pertaining to duties of secretary and of treasurer, further provided that the secretary "shall keep the proper books of account, and discharge such other duties as pertain to his office and as are prescribed by the board of directors". In recent years the board of directors was composed of W. L. Groom, now deceased, who for eight or ten years was in bad health, and whose general guardian instituted this action, W. T. Keeton, formerly of Elmira, New York, now of Florida, Mrs. K. J. Harris, of New York, and S. T. Anderson, of the office of company.

Anderson testified, in part, as follows: "How long Mr. Groom was in bad health is hard to say, but he was *** 8 or 10 years. *** As he went down I naturally took hold without authority. I paid the bills when I had the money. I collected the money and made sales to customers. As long as he could do it he handled as much of the general management of the business as he could. After he got so he couldn't, the burden fell on me. During 1939 and 1940, I was not absolutely in complete charge. I can't carry dates very well but I shouldn't say over a year and a half or may be a year that he had been totally incapacitated. On February 15, 1940, Mr. Groom was not absolutely able to attend to his duties. For the last four or five years Mr. Groom hasn't been able to attend to a lot of things. It is hard for me to answer the question whether if on February 15, 1940. I was not for all general purposes the head of the business. I was there and he was sick, I was doing the best I could with it. Conditions were not as bad on February 18, 1939, as in 1940. I was there and so was he and what he could not do I tried to do *** The directors met very seldom. Years ago we had stockholders and directors meetings once a year *** we ran along several years without meeting *** I think they met in the last two years. Mrs. Harris didn't come down to the meeting. She resigned as a director. I think Mr. Keaton was here. At the time the payment was made on my note and Mr. Groom's note was renewed (in 1939, he thinks) Mr. Groom and I were the active managers of the business. We didn't renew Mrs. Hanes' notes, *** I have never at any time signed a note for the corporation."

Anderson further testified that in February, 1939, the Swansboro Land & Lumber Company, of which Groom was largest stockholder, and in which the Harris family had stock, but in which the Baker family had none, was indebted to both the Tar River Lumber Company and the First National Bank of Elmira, New York; that under an arrangement pertaining to timber contract between Tar River Lumber Company and Swansboro Land & Lumber Company, the former was to make certain payments to the bank; and that from then on frequent statements were submitted to the bank in connection with the indebtedness to it. The witness further testified that "at end of each year we made financial statements of the Tar River Lumber Company and perhaps the First National Bank of Elmira, New York, got copies of those statements"; and, further, that neither the president nor directors authorized him to acknowledge any of the corporation's indebtedness to other people; that in 1939 the corporation executed renewal notes for indebtedness to Groom and same were signed by Groom as president and by him as secretary,--which he thinks was pursuant to a resolution of the board of directors; and that "the question of renewing Mrs. Hanes' notes was discussed between the president of the corporation and me, and Mr. Groom chose not to renew them".

Upon stipulations and admission in open court, and from documentary and oral evidence presented, the court finds pertinent facts substantially these: 1. Ida Baker Hanes is the holder of the two notes offered in evidence, on which interest has been credited to September 18, 1930, and to February 4, 1927, respectively. After the dates to which interest has been so credited, no payments have been made on either of the notes.

2. That, "On February 18, 1939, S. T. Anderson, who was Secretary-Treasurer of Tar River Lumber Company, sent to M D. Thompson, an officer of First National Bank & Trust Company, of Elmira, N. Y., a financial statement of Tar River Lumber Company, which listed said notes under the heading 'notes payable to stockholders,' The First National Bank & Trust Company of Elmira was the financial agent of Ida Baker Hanes, but was also a holder of stock in Tar River Lumber Company as collateral to loans and was the holder of notes of Swansboro Land & Lumber Company, a subsidiary corporation of Tar River Lumber Company, and was endeavoring to collect the notes of Swansboro Land & Lumber Company through...