Wilson v. Crab Orchard Development Co.

• Decision Date: 30 January 1970
• Docket Number: No. 45,45
• Citation: 171 S.E.2d 873,276 N.C. 198
• Court: North Carolina Supreme Court
• Parties: Lula WILSON, Executrix of the Estate of Damus B. Wilson v. CRAB ORCHARD DEVELOPMENT COMPANY, Inc., Leon Olive, Lewis B. Frost, and FredDenson.

Page 873

171 S.E.2d 873

276 N.C. 198

Lula WILSON, Executrix of the Estate of Damus B. Wilson v. CRAB ORCHARD DEVELOPMENT COMPANY, Inc., Leon Olive, Lewis B Frost, and FredDenson.

No. 45.

Supreme Court of North Carolina.

Jan. 30, 1970.

Newitt & Newitt, Charlotte, for plaintiff appellant.

Barnes & Dekle, Charlotte, for defendant appellees.

LAKE, Justice.

A court of record has inherent power to render judgment on the pleadings where the facts shown and admitted by the pleadings entitle a party to such judgment. Erickson v. Starling, 235 N.C. 643, 71 S.E.2d 384; City of Raleigh v. Fisher, 232 N.C. 629, 61 S.E.2d 897; 71 C.J.S. Pleading § 424. A motion for such judgment is in the nature of a demurrer and presents the issue of law, Are the matters set up in the pleading of the opposing party sufficient in law to constitute a cause of action or a defense? Jones v. Warren, 274 N.C. 166, 161 S.E.2d 467; Van Every v. Van Every, 265 N.C. 506, 144 S.E.2d 603; Erickson v. Starling, supra; City of Raleigh v. Fisher, supra.

A party who moves for judgment on the pleadings thereby admits, for the purpose of the determination of such motion: (1) The truth of all well-pleaded facts in the pleading of his adversary, together with all fair inferences to be drawn from such facts; and (2) the untruth of his own allegations controverted by the pleading of his adversary. Jones v. Warren, supra; Shaw a Eaves, 262 N.C. 656, 138 S.E.2d 520; Erickson v. Starling, supra; City of Raleigh v. Fisher, supra. He does not thereby admit the conclusions of his adversary stated in such pleading or mere epithets such as 'fraud' and 'fraudulent.' Jones v. Warren, supra; Van Every v. Van Every, supra; 71 C.J.S. Pleading § 426.

In determining the motion the court looks only to the pleadings. It hears no evidence, makes no findings of fact and does not take into account other statements of fact in briefs of the parties, or in testimony or allegations by them in a different proceeding. It is limited to the facts properly pleaded in the pleadings before it, inferences reasonably to be drawn from such facts and matters of which the court may take judicial notice. Erickson v. Starling, supra; Strong, N.C. Index 2d, Pleadings, § 38; 71 C.J.S. Pleading § 426. An exhibit, attached to and made a part of the pleading, is so considered. Van Every v. Van Every, supra. The terms of such exhibit control other allegations of the pleading attempting to paraphrase or construe the exhibit, insofar as these are inconsistent with its terms.

Although a complaint is not demurrable for the reason that it shows upon its face that the cause of action alleged is barred by the statute of limitations, it is well settled in this State that when the defendant pleads the statute of limitations in his answer, the plaintiff files no reply thereto and the complaint shows upon its face facts which, without more, support such plea in bar, the defendant's motion for judgment on the pleadings should be granted on that ground. City of Reidsville v. Burton, 269 N.C. 206, 152 S.E.2d 147; B-W Acceptance Corp. v. Spencer, 268 N.C. 1, 149 S.E.2d 570; Van Every v. Van Every, supra; McIntosh, North Carolina Practice & Procedure, 2d Ed., § 373, and Phillips' 1969 pocket parts thereto.

The trial court is not required to specify its reason for allowing a motion for judgment on the pleadings. Strong, N.C. Index 2d, Pleadings, § 38. If it does state a ground for its judgment which is incorrect, but the judgment was nevertheless proper, it will be affirmed on appeal. B-W Acceptance Corp. v. Spencer, supra. In the Spencer case, judgment on the pleadings was entered dismissing a counterclaim on the ground that it was barred by the statute of limitations, this being the ground therefor stated in the motion. Affirming the judgment, Parker, C.J., speaking for the Court, said:

'Original defendants' counterclaim is so fatally deficient in substance as against plaintiff that it presents no material issue of fact to support a recovery from plaintiff of damages in the amount of $50,000, or to operate as a setoff against plaintiff's claim. Consequently, it is subject to a judgment on the pleadings. The judgment on the pleadings should have been granted on the ground that the original defendants' counterclaim is fatally deficient in substance. Therefore, the granting of the judgment on the pleadings in favor of plaintiff was correct, though it was placed on the wrong ground.'

In their first further answer, the defendants allege that it appears upon the face of the complaint that the plaintiff seeks to have the assignment by Denson and wife to Crab Orchard on 28 October 1960 declared an assignment for the benefit of creditors, that if such liability exists it is a liability created by statute, that the plaintiff had actual knowledge of the assignment almost seven years prior to the institution of this action and, therefore, her claim is barred by the three-year statute of limitations set forth in G.S. § 1--52(2). This is, in form, a sufficient plea of the statute as a bar to the plaintiff's right of action. Citizen's Nat. Bank v. Gaston Farmers' Union Warehouse Co., 172 N.C. 602, 90 S.E. 698. It far surpasses the mere assertion, without any allegation of facts to support it, that the plaintiff's cause of action is barred by the statute. Such unsupported assertion has repeatedly been held insufficient to constitute the plea in bar. Lassiter v. Roper, 114 N.C. 17, 18 S.E. 946; Pope v. Andrews, 90 N.C. 401; Humble v. Mebane, 89 N.C. 410.

Consequently, the plaintiff having filed no reply to this plea, we turn to the complaint to see whether: (1) it fails to state facts constituting a cause of action against the defendants, or (2) if it states a cause of action, it also shows facts sufficient in themselves to support the plea that such cause of action is barred by the statute of limitations. If either of these inquiries be answered in favor of the defendants, their motion for judgment on the pleadings was properly allowed, even though the superior court granted it on the second ground only. The Court of Appeals resolved both inquiries in favor of the defendants and affirmed the judgment.

The Court of Appeals said, 'We hold that the facts alleged in the complaint do not constitute an assignment for the benefit of creditors.' We agree.

G.S. § 23--1 provides: 'Debts mature on execution of assignment; no preferences.--Upon the execution of any voluntary deed of trust or deed of assignment for the benefit of creditors, all debts of the maker thereof shall become due and payable at once, and no such deed of trust or deed of assignment shall contain any preferences of one creditor over another, except as hereinafter stated.'

It will be observed that this statute does not define an assignment for benefit of creditors but merely forbids a preference in such assignment. We must go, therefore, to the common law, as declared in the decisions of this Court, to determine what constitutes an assignment for the benefit of creditors. In 6 Am.Jur.2d, Assignments for Benefit of Creditors, § 1, it is said:

'A general assignment for the benefit of creditors is ordinarily a conveyance by a debtor Without consideration from the grantee of substantially all his property In trust to collect the amount owing to him, to sell and convey the property, to distribute the proceeds of all the property among his creditors, and to return the surplus, if any, to the debtor.' (Emphasis added.)

The assignment of 28 October 1960 from Denson and wife to Crab Orchard was, according to the complaint, made in exchange for the simultaneous issue to Denson of 32,260 shares of Crab Orchard, a newly formed corporation, had struction of the complaint is that Crab Orchard a newly formed corporation, had no other assets and no liabilities, except perhaps obligations for nominal amounts for organizational expenses. That being true, the shares issued to Denson, when received by him, had a value equal to the value of the property transferred by him and his wife to Crab Orchard. Thus, at that stage of the proceedings, Denson had, available for his creditors as much property as he had prior to the assignment to Crab Orchard. Though he was then insolvent, according to the complaint, it was not unlawful or a violation of any duty owed to the plaintiff or his other creditors for Denson so to change the form of his property nothing else appearing. Estridge v. Denson, etc., 270 N.C. 556, 565, 155 S.E.2d 190. The transfer of the certificates to Crab Orchard was for a valuable consideration, moving to Denson from Crab Orchard.

The assets of a corporation, nothing else appearing, are not held by it in trust. They, like the assets of any other person, may be used by the corporation in the operation of its business. The complaint does not state the objects for which Crab Orchard was incorporated, as set forth in its charter. While, upon this motion for judgment on the pleadings, we may not consider the allegation in the answer to the effect that, at that stage of the proceedings, it was contemplated that Crab Orchard would engage in the real estate business, we may reasonably assume that its charter authorized Crab Orchard to conduct some business. Within the limits of its corporate powers, it was free to use for the carrying on of business the capital acquired by it in exchange for the stock which it issued.

Upon dissolution of the corporation, it would be under a duty first to apply its assets, including such capital, to the payment of its own debts and then to distribute the remainder to its then stockholders, observing the respective rights of the preferred and common shares. Teague v. Teague Furniture Co., 201 N.C. 803, 161 S.E. 530. A corporation may, of course, receive property other than its capital, upon its agreement to hold it in trust for designated persons. There is, however, at least, serious doubt that a corporation may make a valid...