Seminole Phosphate Co v. Johnson

• Decision Date: 22 October 1924
• Docket Number: (No. 108.)
• Citation: 124 S.E. 859
• Court: North Carolina Supreme Court
• Parties: SEMINOLE PHOSPHATE CO. v. JOHNSON.

124 S.E. 859

SEMINOLE PHOSPHATE CO.

v.JOHNSON.

(No. 108.)

Supreme Court of North Carolina.

Oct. 22, 1924.

(188 N.C.)

Appeal from Superior Court, Wayne County; Midyette, Judge.

Action by the Seminole Phosphate Company against John P. Johnson. Judgment for plaintiff, ami defendant appeals. New trial.

The execution of the notes by defendant, both dated July 15, 1920. one for $400. due November 1, 1920. and the other for $300, due March 1, 1921. and payable to plaintiff, a corporation organized under the laws of this state, was admitted. It was also admitted that no payment had been made on said notes, or either of them, and that both were past due when this action was begun.

For a defense to plaintiff's cause of action upon said notes, defendant, in his answer, alleged that said notes were null and void, for the reason that they were obtained from defendant by false and fraudulent representations. as set out in the answer, and for the further reason that the consideration for the said notes was the purchase price of seven shares of the capital stock of plaintiff corporation sold to defendant by an agent of plaintiff; that the sale of the said stock was made in violation of section 6367, Consolidated Statutes of North Carolina: that the contract for sale of said stock was not' in writing and did not contain the provision required by said statute; and that said stock hits not been issued or delivered to defendant.

After the institution of this action, plaintiff became insolvent, and the receiver appointed by the court has been made a party plaintiff to this action

After the pleadings were read at the trial, the court held, without objection, that upon the admissions contained in the answer and entered formally in the record, defendant was entitled to open and conclude, and that—

"Plaintiff was entitled to recover upon the notes set out in the complaint, unless the jury should find by the greater weight of the evidence that the notes were without consideration, and were procured by false and fraudulent representations as alleged in the answer."

Defendant offered as evidence the testimony of himself and of Marvin Wade, agentof plaintiff. This evidence tends to show that Mr. Wade, agent of the Seminole Phosphate Company, on or about July 15, 1920, negotiated a contract with defendant, by which plain-lift sold to defendant seven shares of the capital stock of plaintiff, of a new issue, and of the par value of $700: that the notes set out in the complaint were executed for the purchase price of said stock; that no writing containing the provision required by C. S. § 6367, was signed by plaintiff or defendant: that no writing containing said provision was shown by the agent to defendant. Both defendant and the agent testified that they did not remember whether the contract of sale of said stock was in writing or not, and the agent testified that he did not carry any contracts with him, and that he did not show to defendant any contract containing the provision required by the statute; that the total amount of the new issue of stock was.81, 000.000. and the money was to be used for building a new plant at Raleigh.

The evidence further tended to show that the agent told defendant that a dividend of 14 per cent, had been declared on the first issue of stock, then outstanding, and that same would bo paid immediately: that defendant, owned three shares of said first issue: that the stock sold would be issued upon receipt by the plaintiff of the notes: that the stock has never been tendered to defendant by plaintiff, and that defendant has not received anything of value for said notes; that no dividend has ever been paid or tendered to defendant on the shares of stock of the first issue owned by him; that the agent was instructed by plaintiff to pay 14 per cent, dividend on the first issue of stock in fertilizers, or by crediting indebtedness of stockholder to the company.

The agent testified that if defendant had paid his notes, he would have received credit for a dividend of 14 per cent, on the shares owned by him, of the first issue. The agent testified that plaintiff promised to pay him a commission of 10 per cent, on the amount of stock sold by him. but that no commission had been paid upon the sale to defendant, because the notes had not been paid.

Ellis Goldstein was sworn as a witness for defendant and offered to testify that ho agreed to purchase a portion of the second issue of stock in plaintiff company from an agent of the company; that he gave his note for said stock, upon plaintiff's agreement that said stock would be issued immediately upon receipt, of his note; that said stock has never been issued and delivered or tendered to him. Plaintiff's objection to this testimony was sustained and defendant excepted. This is defendant's first exception.

At the conclusion of the evidence, plaintiff moved for judgment upon the pleadings. No issues were submitted to the jury, and judgment was signed by his honor as follows:

"This cause coming on to be heard and being heard before his honor, Garland E. Midyette and a jury, and it appearing to the court that the execution of the notes in question is admitted and that defendant has failed to produce any staple evidence in support of any defense to the payment of the notes, now, therefore, it is considered, ordered, and adjudged that plaintiff recover of defendant the sum of 865S with interest thereon from November 1, 1920, together with the costs of this action to be taxed by the clerk."

Defendant excepted to the order sustaining plaintiff's motion for judgment upon the pleadings and to the judgment as signed by his honor, and these were defendant's second and third exceptions.

Defendant appealed from the judgment rendered. the case on appeal, appearing in the transcript sent to this court, was settled by agreement of attorneys for plaintiff and defendant.

Godwin & Williams, of Dunn, for appellant.

Langston, Allen & Taylor and Kenneth C. Royall, all of Goldsboro, for appellee.

CONNOR, J. [1] Defendant's exception to the exclusion of the testimony of the witness Goldstein, offered by defendant as evidence upon his allegation that the execution of the notes was procured by fraudulent representations, must be sustained. This testimony was competent as evidence tending to establish a fact proper to be considered by the jury in determining whether or not the same representation, if made to defendant, was fraudulent. If the jury should find that in selling to another stock of the same series as that sold to defendant, the same representation was made to both as an inducement to purchase the stock, and that plaintiff had failed to comply with its agreement with both purchasers, this would he a circumstance which the jury could properly consider in determining whether or not the representation was made to defendant with fraudulent intent. Brink v. Black, 77 N. C. 60; Robertson v. Hal-ton, 156 N. C. 215, 72 S. E. 316, 37 L. R. A. (N. S.) 298. There was error in sustaining plaintiff's objection to this testimony.

In the case on appeal, agreed upon by attorneys for plaintiff and defendant, it is stated that, at the beginning of the trial, after the court had held, without objection, that by reason of the admissions in the answer "the burden was upon defendant to' satisfy the jury, by the greater weight of the evidence, that the notes were without consideration and were procured by false and fraudulent representations, the court further held as a matter of law that the notes are for value unless the defendant satisfies the jury by the greater weight of the evidence that the consideration for the notes was without value." No exception is noted to such holding.

In the judgment, signed by his honor, there is a recital that, "it appearing to the court that the execution of the notes in question is admitted, and that defendant has failedto produce any staple evidence in support of any defense to the payment of said notes, " it is therefore ordered, considered, and adjudged that plaintiff recover of defendant. Defendant excepted to the ruling of the court upon plaintiff's motion at the conclusion of the evidence for judgment upon the pleadings and also to the judgment as signed.

A careful consideration of the foregoing statement and of the recital in the judgment loaves us in some uncertainty as to whether his honor held as a "matter of law" that the defense based upon the allegations that the notes were null and void— for the reason that the contract for the sale of the stock was illegal, because not reduced to writing as required by C. S.6367—would not avail defendant, or whether he held that defendant had failed to produce evidence in support of such defense. Evidence was offered from which the jury could have found that the contract of sale of stock by Wade, as agent of plaintiff to defendant, was not in writing and did not contain the provision required by C. S. 0307, relative to amount to be paid as commission for making the sale; and that the notes were given for stock in plaintiff company, sold in violation of this statute. There was also evidence that, the company had agreed to pay the agent, who negotiated the sale, 10 per cent, of the amount received its purchase price of the stock, as his commission. We must therefore conclude that his honor held that the defense was not available to the defendant in this action as "a matter of law, " and that plaintiff could recover on the notes, notwithstanding the facts which the jury might find from the evidence.

We are advertent to the fact that there has been some uncertainty, and some doubt expressed, as to whether C. S. 6367, applies to sales of stock in corporations organized under the laws of this state. Suggestions have been made that this section applies only to sales of stock by foreign companies; that is, by companies organized under the laws of other states and seeking to do business in this state.

Section 6367 of the...