Virginia-Carolina Chemical Co. v. Floyd

• Decision Date: 03 April 1912
• Citation: 74 S.E. 465,158 N.C. 455
• Parties: VIRGINIA-CAROLINA CHEMICAL CO. v. FLOYD et al.
• Court: North Carolina Supreme Court

74 S.E. 465

158 N.C. 455

VIRGINIA-CAROLINA CHEMICAL CO. v. FLOYD et al.

Supreme Court of North Carolina

April 3, 1912

Appeal from Superior Court, Robeson County; Caster, Judge.

Action by the Virginia-Carolina Chemical Company against O. I. Floyd and others. Judgment for defendants, and plaintiff appeals. Reversed.

A complaint, alleging that defendants, while in control of a corporation, received money and notes belonging to plaintiff under a contract with the corporation, and knowingly misapplied and misappropriated the same states a cause of action.

The plaintiff is the Virginia-Carolina Chemical Company, and the defendants are O. I. Floyd, A. N. Mitchell, and wife Elizabeth A. Mitchell.

The complaint filed by the plaintiff is as follows:

First. That it is a corporation duly organized and existing under and by virtue of the laws of the state of New Jersey, and having offices in the city of Richmond, in the state of Virginia, and the city of Durham, state of North Carolina.

Second. That Floyd Bros. & Mitchell, Inc., was at the time hereafter referred to, and is now, a corporation existing under and by virtue of the laws of the state of North Carolina, and having its principal place of business in the town of Fairmont, in the county of Robeson, and state aforesaid. That the defendant O. I. Floyd was the secretary and treasurer of said corporation, and the defendant A. N. Mitchell was the president of said corporation, and these two defendants were largely in control of the business of Floyd Bros. & Mitchell Inc.

Third. That on the 15th day of January, 1908, the said Floyd Bros. & Mitchell, Inc., entered into a contract with the plaintiff company, wherein and whereby it undertook to act as selling agent for commercial fertilizers of the plaintiff company under and by virtue of contract, a copy of which is hereto attached; and in pursuance of and according to the terms of said contract, the plaintiff shipped to the said Floyd Bros. & Mitchell, Inc., during the year 1908, commercial fertilizers under said contract of the value of $7,252.56 the purchase price, and the said Floyd Bros. & Mitchell Inc., sold on behalf of the plaintiff, for cash and on credit, a large portion of the said fertilizers, and paid over to the plaintiff on such account the sum of $3,850.30. The sixth paragraph of said contract is as follows: "(6) That until sold or settled for by the customer, the fertilizer contracted for under this agreement shall remain the property of the company, and when sold, all the proceeds of the sale of such fertilizer, including cash, notes, liens, bills of sale, open accounts and collections therefrom, whenever in possession, shall be kept separate and be held by the customer for the use and benefit of the company and subject to its order, and the same, together with any unsold fertilizer taken under this agreement, shall be the property of the company until the entire indebtedness of the customer arising under this agreement has been paid."

Fourth. That on the--day of March, 1909, upon petition of certain creditors, said Floyd Bros. & Mitchell, Inc., was adjudicated an involuntary bankrupt, and plaintiff is informed, believes, and alleges that the assets upon distribution will not be sufficient to pay more than a small per cent. of claims proven against the said bankrupt company.

Fifth. That plaintiff is informed, believes, and alleges that a certain amount of money, for which the bankrupt sold the goods to the plaintiff, was collected by it, amounting to the sum of $872.61, and that the defendants O. I. Floyd and A. N. Mitchell knew that the said sum of money was the property of this plaintiff, and that it was the duty of Floyd Bros. & Mitchell, Inc., its officers, agents, and employés, to pay over to said plaintiff said sum, and that in violation of said duty O. I. Floyd and A. N. Mitchell misappropriated and misapplied said sum of money to other purposes, in violation of the trust imposed upon each of them by said contract, and thereby perpetrated a fraud on this plaintiff, wherein they became personally responsible to the plaintiff for said breach of trust, as plaintiff is informed, believes, and alleges.

Sixth. That on the -- day of January, 1909, the defendants O. I. Floyd and A. N. Mitchell, in breach of the trust imposed by the said contract between Floyd Bros. & Mitchell, Inc., and this plaintiff, misapplied and misappropriated certain notes which had been taken by their company for goods of the plaintiff sold by them as agent under said contract, as they and each of them well knew, to the amount of $760.70, and thereby committed a breach of trust and fraud upon this plaintiff, for which they and each of them are personally responsible, as plaintiff is advised.

Seventh. That the defendant Elizabeth A. Mitchell is the wife of the defendant A. N. Mitchell, and that on the -- day of --, 1908, the defendant A. N. Mitchell was the owner of certain real estate in the county of Robeson, state aforesaid, described in the 11 certain deeds hereto attached, and made a part of this complaint.

Eighth. Plaintiff is informed, believes, and alleges that the defendant A. N. Mitchell transferred to his wife, the defendant Elizabeth A. Mitchell, all of the property set out in the deeds hereinbefore referred to, and that at the time of said conveyance the defendant A. N. Mitchell was deeply indebted to various sundry parties, and that said deeds were made voluntary, and without reserving property sufficient to pay all of his debts, and that said deeds were made for the purpose of hindering, delaying, and defrauding his creditors, including this plaintiff, as plaintiff is informed, believes, and alleges, and are null and void.

The defendants demurred to the complaint: (1) For that the superior court had no jurisdiction, on account of the pendency of the proceeding in bankruptcy against the corporation. (2) For that the corporation is not a party. (3) For that the trustee in bankruptcy is not a party. (4) For that there is a misjoinder of parties and causes of action. (5) For that the complaint does not state a cause of action. The demurrer was sustained, and the plaintiff excepted and appealed.

Rountree & Carr and R. G. Grady, for appellant.

McIntyre, Lawrence & Proctor and McLean, Varser & McLean, for appellees.

ALLEN J.

The demurrer admits the allegations of the complaint, and it is well to see, in the first instance, if a cause of action is stated by the plaintiff. If not, the action must be dismissed, and it will not be necessary to consider the other grounds of demurrer, and, on the other hand, if the complaint states a cause of action, an examination and analysis of it will aid in passing on the effect of the proceeding in bankruptcy and the necessity for the presence of the corporation or the trustee in bankruptcy, as a party. Contracts almost identical with the one alleged to have been entered into between the corporation, Floyd Bros. & Mitchell, and the plaintiff, have been considered in several decisions of our court. and it has been held in each that the proceeds of sales of fertilizers made thereunder, whether in money or notes, are the property of the person originally furnishing the fertilizer for sale. Chemical Co. v. Johnson, 98 N.C. 123, 3 S.E. 723; Hoffman v. Kramer, 123 N.C. 566, 31 S.E. 828; Lance v. Butler, 135 N.C. 422, 47 S.E. 488. And it is also held that such a contract makes the person, with whom it is made, a trustee of the notes taken from the purchasers of fertilizer, and of the money derived from sales, or collected on notes, for the benefit of the original owner of the fertilizers. Guano Co. v. Bryan, 118 N.C. 579, 24 S.E. 364; Chemical Co. v. McNair, 139 N.C. 335, 51 S.E. 949.

The complaint alleges that the defendant O. I. Floyd was the secretary and...