Tractor & Auto Supply Co. v. Fayetteville Tractor & Equipment Co., 6812SC358

• Decision Date: 16 October 1968
• Docket Number: No. 6812SC358,6812SC358
• Citation: 2 N.C.App. 531,163 S.E.2d 510
• Court: North Carolina Court of Appeals
• Parties: TRACTOR AND AUTO SUPPLY COMPANY, Inc. v. FAYETTEVILLE TRACTOR AND EQUIPMENT COMPANY, Inc., Original Defendant, andAdditional Defendant, First-Citizens Bank & Trust Company.

Page 510

163 S.E.2d 510

2 N.C.App. 531

TRACTOR AND AUTO SUPPLY COMPANY, Inc. v. FAYETTEVILLE TRACTOR AND EQUIPMENT COMPANY, Inc., Original

Defendant, andAdditional Defendant, First-Citizens

Bank & Trust Company.

No. 6812SC358.

Court of Appeals of North Carolina.

Oct. 16, 1968.

Jordan, Morris & Hoke by William R. Hoke, Raleigh, for First-Citizens Bank & Trust Co., appellant.

J. Duane Gilliam, Fayetteville, for H. Dolph Berry, receiver of Fayetteville Tractor and Equipment Co., Inc., appellee.

MALLARD, Chief Judge.

First-Citizens makes and brings forward four assignments of error as follows:

(1) 'The Court erred in overruling the appellant's motion to amend its Proof of Claim so as to allege a fraudulent 'kiting' of checks by Fayetteville Tractor and Equipment Company, Inc.'

(2) 'The Court erred in failing to find as a fact that there are issues of fact which arise upon the written exceptions filed by the appellant. * * *'

(3) 'The Court erred in concluding as a matter of law that the receiver's report on the claim of the appellant should be affirmed. * * *'

(4) 'The Court erred in signing and entering the Judgment dated 13 May 1968, for that the Judgment contains errors on its face in that it is not properly supported by findings of fact and conclusions of law.'

MOTION TO AMEND

From this record, we do not know when or in what manner First-Citizens made its motion to amend. First-Citizens filed its Proof of Claim on 22 October 1965 after having been made an additional party defendant on 3 June 1965.

On 2 November 1965 the Receiver, in his answer in case No. 6812SC359, requested that plaintiff's complaint and amendment thereto be treated as a verified proof of claim in this case. First-Citizens did not join in this request and made no motion to amend until 13 May 1968, which is the same date that the Superior Court approved the report of the Receiver denying a preferential status to its claim. The order of Judge Braswell denying the motion to amend is dated 13 May 1968, but it was not filed until 15 May 1968. The following appears on page seven of appellee's brief:

'The order of the trial Court in denying the motion of First-Citizens Bank and Trust Company Made orally at the hearing on May 13, 1968, to amend its proof of claim, was fully justified in law and upon the facts and should be affirmed.' (emphasis added)

It should be noted that a brief is not a part of the record on appeal. See Rule 19 of the Rules of Practice in the Court of Appeals. However, in view of the filing date and the date of the order, we assume that the motion to amend was made at the time appellee contends. On the record here, there is nothing to show when the motion was made. However, appellant says on page eleven of its brief that the motion was made after the trial court dismissed First-Citizens' action in No. 6812SC359, which occurred under date of 13 May 1968.

With respect to motions to amend, we find in 6 Strong, N.C. Index 2d, Pleadings, § 32, at page 356, the following:

'The trial judge in term, in his discretion, may allow amendments.

A motion to amend, after the beginning of the trial, is addressed to the discretion of the trial court, and its decision is not appealable. * * *'

We are of the opinion that First-Citizens did not make timely motion to amend its proof of claim as a matter of right. Over two years had passed since the Receiver had ruled on the claim filed by First-Citizens. G.S. § 1--507.6 authorizes the court to limit the time within which creditors may present and prove to the receiver their respective claims against the corporation and may bar all creditors and claimants failing to do so within the time allotted from participating in the distribution of the assets of the corporation. First-Citizens in its 'Exception To Report of Receiver,' dated 23 December 1965 asserts, among other things, that the 'funds represented' by its claim were 'wrongfully and unlawfully obtained' from First-Citizens. The record shows that the notice of the Receiver to present claims to him indicated that the court ordered that all claims must be presented on or before 1 November 1965, and upon a failure to do so the notice would be pleaded in bar thereof. The report of the Receiver on the claim of First-Citizens was made, as required by the statute, to the 3 January 1966 Civil Session of the Superior Court of Cumberland County. The record does not reveal what, if anything, was done about the report until 13 May 1968.

Under the circumstances of this case, we conclude that Judge Braswell did not abuse his discretion by refusing to permit First-Citizens to amend its Proof of Claim in the Superior Court on 13 May 1968, the date of the hearing on the report of the Receiver.

In its exception to the report of the Receiver dated 23 December 1965, First-Citizens contended that its claim was a preferred claim 'for the reason that the funds represented by said claim were wrongfully and unlawfully obtained.'

However, it does not assert therein any factual basis for its conclusion that the funds were wrongfully and unlawfully obtained, other than by the use of the checks as set out in its Proof of Claim.

First-Citizens' oral motion to amend on 13 March 1968 was, according to the order of Judge Braswell, 'for an Order allowing it to amend its Proof of Claim previously filed herein so as to allege a fraudulent 'kiting' of checks by Fayetteville Tractor and Equipment Company, Inc.' Even if such motion had been allowed, it could not have changed the result reached herein.

In connection with its motion to amend, appellant in its brief asserts:

'Although the receiver's answer in First-Citizens' action asked that the complete allegations of fraud as contained in the complaint be incorporated in First-Citizens' Proof of Claim in the instant receivership proceedings, the trial Court dismissed First-Citizens' action on the receiver's plea in bar and made no reference to such an incorporation. First-Citizens then moved the Court for permission to amend its Proof of Claim so as to include therein the complete allegations of the complaint, but the motion was denied. This denial by the Court is the basis of one of the appellant's exceptions in this appeal.'

The record, as shown by appellant's assignment of error No. 1, does not support appellant's contention that its motion was for permission to include in its Proof of Claim the complete allegations of the complaint. However, even if such motion had been made, and allowed, it could not have changed the result reached herein.

ISSUE OF FACT

Appellant contends that a liberal construction of the complaint filed in case No. 6812SC359, and the claim filed herein, reveals that it is based on a fraud perpetrated upon it by Fayetteville Tractor because Fayetteville Tractor caused the checks, which were worthless, to be put into circulation when it delivered them to Four County Tractors, Inc. (Four County).

In Cofield v. Griffin, 238 N.C. 377, 78 S.E.2d 131, 40 A.L.R.2d 966, the Supreme Court said that the essential elements of fraud are:

'(1) That defendant made representation relating to some material past or existing fact; (2) that the representation was false; (3) that when he made it, defendant knew that the representation was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that defendant made the representation with intention that it should be acted upon by plaintiff; (5) that plaintiff reasonably relied upon the representation, and acted upon it; and (6) that plaintiff thereby suffered injury.'

The verified complaint alleges in substance that John A. McLamb, while acting as President of Fayetteville Tractor, signed the thirteen checks totaling $113,966.55 drawn on Southern National Bank in Fayetteville, payable to Four County. We assume, therefore, that he put these checks, knowing them to be worthless, into circulation by delivering them to himself in his capacity as President of Four County. Four County took these checks and deposited them to the account of Four County in First-Citizens' Dunn branch. Thereafter, checks by Four County were issued to Fayetteville Tractor and were paid by First-Citizens in the total sum of $50,963.18 before the checks of Fayetteville Tractor had been returned unpaid by Southern National.

There is no allegation specifically or by inference in the claim filed herein, other than the issuance of checks, that First-Citizens reasonably relied upon any representation by Fayetteville Tractor, which is one of the necessary elements of fraud. In fact, the allegations in the Proof of Claim are to the effect that Four County deposited the checks in a checking account it maintained in the Dunn branch of First-Citizens and that First-Citizens paid Four County's checks drawn on this deposit before it had collected the Fayetteville Tractor checks.

The allegations in the complaint in the other case, which is No. 6812SC359, were not and are not incorporated in appellant's Proof of Claim; however, we have carefully examined the complaint and the amendments thereto and do not find any specific allegation, or one by inference, that First-Citizens reasonably relied upon any representation of Fayetteville Tractor, one of the essential elements of fraud.

With respect to the element of reasonable reliance, Justice Sharp, in Johnson v. Owens, 263 N.C. 754, 140 S.E.2d 311, said:

'Just where reliance ceases to be reasonable and becomes such negligence and inattention that it will, as a matter of law, bar recovery for fraud is frequently very difficult to determine. This case presents that difficulty. In close cases, however, we think that a seller who has intentionally made a false representation about something material, in order to induce a sale of his property, should not be permitted to say in effect, 'You ought not to have trusted me. If you had not been so gullible, ignorant, or negligent, I could not have deceived you.' Courts...