Case ID: nc_196/html/0588-01.html
Source: Caselaw Access Project
Author: {"author": "ClaeksoN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ALLIE A. CROMWELL v. CARL M. LOGAN and RALPH BEACHAM, and CARL M. LOGAN and RALPH BEACHAM v. WALNUT MERCANTILE COMPANY, and C. B. MASHBURN, Receiver, and MRS. ALLIE A. CROMWELL.
    (Filed 23 January, 1929.)
    1. Trial — Taking Case or Question From Jury — Nonsuit.
    Upon motion o£ nonsuit all the evidence, whether offered by the plaintiff or elicited from the defendant’s witnesses, will be considered in the light most favorable to the plaintiff, giving him every reasonable intendment thereupon and every reasonable inference to be drawn therefrom.
    2. Fraud — Right of Action and Defenses — Duty to Read Instrument.
    A person who can read and is capable of understanding an instrument is generally required to read a paper before signing it unless he is induced not to do so by positive fraud or false representations made by the other party and relied on by him.
    3. Same — Ratification—Deeds—Nonsuit.
    Where there is evidence tending to show that the plaintiffs were business men of intelligence and that they had an opportunity to read a deed in which was an agreement to assume personal liability for a debt as a part of the purchase price of lands, but that they signed the instrument without reading' it because they assumed that it was drawn in accordance with a previous agreement, with further evidence that the defendants said nothing and did nothing to prevent the plaintiffs from reading the deed, and that after discovery of the error the plaintiffs ratified the fraud by attempting to settle the debts so assumed by personal notes, etc.: Held, the plaintiffs are not entitled to recover, and a judgment as of nonsuit should have been allowed.
    Appeal by Mrs. Allie A. Cromwell from Moore, J., and a jury, at March Term, 1928, of MadisoN.
    Reversed.
    Allie A. Cromwell, on 13 August, 1927, instituted this action against Carl M. Logan and Ralph Beacham, in the Superior Court of Buncombe County, N. C., to recover on the following note alleged to have been assumed by them, viz. :
    “$4,000.00. Asheville, N. C., 12 December, 1925.
    On or before one year after date without grace, for value received, we, or either of us, promise to pay to the order of Allie A. Cromwell, Four Thousand and No/100 Dollars, with interest after date until paid. The drawers and endorsers severally waive presentment for payment, protest and notice of protest and nonpayment of this note, and all defenses on the ground of any extension of the time of its payment that may be given by the holder or holders to them or either of them.
    Due 12 Dec., 1926. Grace S. Lock. (Seal.)
    No, 1.”
    
      (1) The note was secured by deed of trust of even date made by Grace S. Lock (widow) to Guy Weaver, trustee for Allie A. Cromwell, which was duly recorded in the office of the register of deeds in Madison County, N. C., where the land was situate.
    (2) Grace S. Lock on 5 February, 1926, after executing the above deed in trust conveyed the land to the Walnut Mercantile Company, a corporation. This deed was duly recorded in Madison County, N. 0., and the said Walnut Mercantile Company assumed and agreed to pay said note of $4,000 to Allie A. Cromwell.
    (3) The Walnut Mercantile Company, on 7 September, 1926, conveyed said land to Carl M. Logan and Ralph Beacham. This deed was duly recorded in Madison County, N. C. The agreement in the deed is as follows: “That said lands and premises are free from any and all encumbrances excepting a balance of about $14,000 on deed of trust originally for $15,000, payable to S. R. Freeborn, second deed of trust for $4,000 to Allie A. Cromwell; and taxes for the year 1926, all of which obligations are assumed by-the grantees as a part of the purchase price.” Thereafter Carl M. Logan and Ralph Beacham conveyed said land back to the Walnut Mercantile Company with like assumption of debts.
    Carl M. Logan and Ralph Beacham set up as a defense: (1) Actionable fraud; (2) mutual mistake in respect to their assumption of the Allie A. Cromwell note.
    Carl M. Logan and Ralph Beacham subsequently instituted an action against the Walnut Mercantile Company, a corporation, and C. B. Mashburn, receiver of the Walnut Mercantile Company, in the Superior Court of Madison County, N. C., praying that the above provision in regard to their assumption of the plaintiff’s note be set aside (1) for actionable fraud, (2) mutual mistake.
    By consent the actions were consolidated and tried together in Madison County, N. C., and the plaintiff, Allie A. Cromwell, in this action, was made a party defendant to the latter action brought by Logan and Beacham. Several issues were submitted to the jury, the only one answered and now material to be considered is the first:
    “Was the provision in the deed by the Walnut Mercantile Company to Carl M. Logan and Ralph Beacham, whereby they agreed to assume and pay a debt of $4,000 to Allie A. Cromwell, and a balance of about $14,000, inserted therein fraudulently and wrongfully and without the knowledge and consent of said Logan and Beacham? Answer: Yes.”
    The defendants, Carl M. Logan and Ralph Beacham, contended that there was an original contract made between them and the Walnut Mercantile Company, which was lost, which did not contain the personal assumption clause of the debts. That Edward Lock was secretary of the Walnut Mercantile Company, and he stated that if we traded for tbe stock of merchandise “We would not be in any way personally liable for tbe debts of tbe corporation.”
    Carl M. Logan testified: “About a week later we went back to Walnut and saw Mr. Lock again. We went over tbe stock of goods carefully, and Mr. Lock said tbe company owed $5,700 on stock of goods on open account, $2,400 to Citizens Bank of Marshall, $1,500 on tbe store fixtures, and $18,000 on tbe store building and grounds, tbe latter being secured by deeds of trust thereon. He said be would transfer to us tbe corporation and we would not be personally liable for any of this indebtedness. He said, however, that it would be necessary in conveying tbe real estate for tbe corporation to make a deed to' myself and Beaebam personally, as that was tbe only way a corporation could convey real estate. I did not know anything about corporations, and relied on that statement of Mr. Lock. ... A few days later we met at tbe attorney’s office to close tbe contract. When Mr. Beaebam and I arrived Mr. and Mrs. Lock were there and tbe attorney. We did not employ tbe attorney; be represented tbe Locks. We did not have any lawyer. When we entered, Mr. and Mrs. Lock were signing tbe certificates of stock. When through, they laid tbe stock and a deed on tbe table. We delivered to them tbe deed we bad bad prepared for tbe lots in Sunburst Mountains, Inc., and Mr. and Mrs. Lock then left tbe office. We had not read the deed nor the certificate of stoele. I supposed they had prepared it according to the contract. I bad not instructed tbe attorney or any one else to insert in tbe deed that we would personally assume and agree to pay tbe debts of tbe corporation. After tbe Locks left, we told tbe attorney we wanted to elect officers for tbe corporation. He ashed if we wanted to convey the property bach to the corporation. We told him we did, and ashed him to prepare the deed. He prepared tbe deed, and we property executed it, and about ten days later registered them at Marshall. Tbe deeds were in tbe attorney’s office until tbe day we took them to Marshall. It was several months afterwards before I learned that tbe clause concerning tbe personal assumption of tbe debts of tbe corporation bad been inserted in tbe deed. We were trying to trade tbe property to some people, and went to tbe attorney’s office in regard to it, when be mentioned to us that according to tbe deed we were personally liable for tbe debts of tbe corporation. We asked tbe attorney why that was put in tbe deed, and be said they just put one over on us.” On cross-examination be testified: “I was about thirty years old when I received deed from Walnut Mercantile Company. Have high school education. Have traded a good deal. Have been in the real estate business for some time. I own considerable property. I consider myself an intelligent business man. Beceived deed in Asheville and registered it in Marshall. Begistered deed about 10 days after we closed deal. Beaebam and I went to Marshall together when we registered deed. Could not read deed while I was driving automobile to Marshall. Cannot remember salary I was getting after I took charge of corporation. No one prevented us from reading the. deed. Nothing was said by Lock or amy one else to prevent us from reading deed. The attorney is a man of good character. Paid Wilkins to release us from the first mortgage assumed in the deed. Wrote Mrs. Cromwell the following letter:
    ‘Asheville, N. C., 28 September, 1926.
    Mrs. Allie A. Cromwell,
    522 W. 27th Street, Norfolk, V'a.
    Dear Madam: Ralph Beaeham and I have bought out the "Walnut Mercantile Company, and find you hold a second mortgage of $4,000 against the building, due February, 1926. When we bought the business it was in pretty bad shape, and we are getting it straight as fast as possible. We are going to pay it out. We would like to get you to extend your note one year, and we will start paying you $50 and interest each month, for one year, and then pay all the balance December, 1927. We will appreciate it very much if you will do this, and we will be prompt with our payments. Yours very truly,
    CaRl M. LogaN.
    P. S. — Please let us hear from you.’
    The business was a cash business. Went on the rocks after we took charge.”
    The testimony of Ralph Beaeham was to like effect: “I saw the written contract between us and the Walnut Mercantile Company. Mr. Casque had it. I read it carefully. It did not provide that we were to assume the debts of the corporation. The contract stated that we were to convey our twenty-seven lots in subdivision known as Sunburst Mountains, Inc., in Haywood County, for the stock of the Walnut Mercantile Company, of a stock of goods and store building at Walnut, N. C. It also set out the amount of indebtedness against the Walnut Mercantile Company. It did not say anything about us assuming the debts of the corporation. We were in the attorney’s office some time after our trade was closed in regard to another transaction, and the attorney said to us that the Locks had put one over on us. Lock afterwards tried to trade with us for the Walnut Mercantile Company. He saw us several times about it. He always said, ‘If we trade all you will have to do is just transfer the stock to us.’ ”
    On cross-examination: “I am a business man. Have traveled for Armour & Company about eight years. Don’t know whether the $4,000 mortgage was part of purchase price or not. Paid Casque $900. Have had several transactions in real estate. Logan and I went through the real estate in Asheville and were not hurt. We were in the real estate business together. All land we conveyed to Lock, twenty-seven lots in Sunburst Mountains, Inc., in Haywood County, rough and steep. It included right to hunt and fish over 3,500 acres of land. Don’t know exactly how much, perhaps between four and five acres, represented to Locks as real estate development. Showed them a map with property laid off as in lots. Represented to Locks as being worth between $8,000 and $9,000. Allowed salaries from corporation to myself $150 per month. I worked every other day. Logan $150 per month. He worked every other day. Mr. Price $135 per month. Lawson and wife $175 per month. Came with Logan to Marshall and we registered the deed containing assumption clause. Knew about the letter Logan wrote Mrs. Cromwell. Don’t remember asking attorney how to avoid personal liability. No one prevented us from reading deed. Had charge of corporation for about fifteen months. Operated on cash basis. Went on rocks after we took charge. The attorney made no representations. The attorney is a mam of good character.”
    
    The attorney, Edward Lock and Mrs. Lock, his mother, all testified that it was well understood that Carl M. Logan and Ralph Beacham were to, and did, become personally responsible. That the original contract had this agreement and the assumption was put in the deeds with full knowledge and in accordance with agreement. That nothing was done to prevent Logan and Beacham from reading the deeds.
    Allie A. Cromwell testified: “Received letter from Logan. That is the letter (same letter was introduced as appears in cross-examination of Logan, the letter head being as follows: ‘Carl M. Logan, Builder and Real Estate’). Borrowed money to come down here and settle with Logan. He tried to give me a lot in West Asheville for my mortgage. He showed me two lots and said that there was a mortgage against each of them — a house on one of them. Logan said, ‘I know I will have to pay you, but I can’t now.’ I said, ‘I’m a widow, Mr. Logan; give me my money and let me go back home.’
    
    On cross-examination: “Nothing was said about taking notes as a compromise. I did not understand it that way. Lock did not tell me that my mortgage would be a first mortgage.”
    Carl M. Logan testified: “I offered notes to Mrs. Cromwell as a compromise. Notes secured by real estate in West Asheville. Notes ran over period of twenty years. I did not want to go to court. I did not sign the contract with any addition to it that Mrs. Lock says was added to it.”
    At the close of Logan’s and Beacham’s evidence, treated as plaintiffs in this action, and at the close of all the evidence, Allie A. Cromwell, as defendant in case against ber of Logan and Beacbam, moved for judgment as in case of nonsuit. C. S., 567. Tbe court below denied tbe motion. Allie A. Cromwell excepted, assigned error and appealed to tbe Supreme Court.
    
      Roberts, Young & Lane for Oarl M. Logan and- Ralph Beach am.
    
    
      Glande L. Love, Oscar Stanton and Geo. M. Pritchard for Allie A. Cromwell.
    
   ClaeksoN, J.

It is tbe well settled rule of practice and tbe accepted position in tbis jurisdiction tbat, on a motion to nonsuit, tbe evidence wbicb makes for tbe plaintiff’s claim, and wbicb tends to support ber cause of action, wbetber offered by tbe plaintiff or elicited from tbe defendant’s witnesses, will be taken and considered in its most favorable light for tbe plaintiff, and sbe is “entitled to tbe benefit of every reasonable intendment upon tbe evidence and every reasonable inference to be drawn therefrom.” Nash v. Royster, 189 N. C., at p. 410.

Tbe jury only passed on tbe issue of actionable fraud, and we will consider alone tbis aspect. "Was there sufficient evidence to be submitted to tbe jury? We think not.

Speaking to tbe subject of actionable fraud, in Leonard v. Power Co., 155 N. C., at p. 17, it is said: “It is true tbat a person who can do so is generally required to read a paper before signing it, and bis failure to do so is negligence for wbicb tbe law affords no redress. This rule does not apply, however, in case of positive fraud or false representation made by another party, by wbicb tbe person signing tbe paper is lulled into security or thrown off bis guard and prevented from reading it, and induced to rely upon such false representations or fraud.” Taylor v. Edmunds, 176 N. C., 328; Oil and Grease Co. v. Averett, 192 N. C., 465; Butler v. Fertilizer Works, 193 N. C., 632.

We think tbe law above stated is well settled in tbis jurisdiction, but tbe facts in tbis case do not come within tbe principle above set forth. We think tbe law applicable as stated in Forbes v. Mill Co., 195 N. C., at p. 54-5, quoting from Colt v. Kimball, 190 N. C., at p. 172-3, Varser, J., speaking for tbe Court, citing a wealth of authorities, said: “ ‘Defendant’s testimony shows tbat be is a man of education and prominence, accustomed to tbe transaction of business, and of much experience, with more than an average education, who has served on tbe board of education for Yanee County for many years. It was bis duty, unless fraudulently prevented therefrom, to read tbe contract, or, in ease be was not able to read tbe fine print without stronger glasses, to have it read to him. Tbis rule does not tend to impeach tbat valuable principle wbicb commands us to treat each other as of good character, but rather enforces along with it tbe salutary principle tbat each one must ‘mind bis own business’ and exercise due diligence to know wbat be is doing. Having executed tbe contract, and no fraud appearing in tbe procurement of tbe execution, tbe Court is without power to relieve tbe defendant on .tbe ground tbat be thought it contained provisions which it does not. He is concluded thereby to tbe same extent as if be bad known wbat due diligence would have informed him of, to wit, its plain provisions tbat tbe agent bad no authority to make agreements other than those contained therein, and tbat such agreements, if made, were not a part of tbe contract.’ Furst v. Merritt, 190 N. C., 397; Dunbar v. Growers, 190 N. C., 608; Hoggard v. Brown, 192 N. C., 494; Finance Co. v. McGaskill, 192 N. C., 557.” See Peyton v. Griffin, 195 N. C., 685.

In Abel v. Dworsky, 195 N. C., p. 868, it is said: “There was other evidence tending to show ratification. If plaintiffs discovered tbe fraud and ratified tbe sale, they cannot now recover in this action. 12 R. C. L., p. 412; Darden v. Baker, 193 N. C., 386.” Sugg v. Credit Corp., ante, page 97.

“One who has assumed or contracted for tbe payment of another’s debt may be sued directly by tbe creditor.” Glass Co. v. Fidelity Co., 193 N. C., at p. 772.

Carl M. Logan and Ralph Beacbam were men of education and intelligent business men and in tbe real estate business together. Both testified that nothing was said at tbe time to prevent them from reading tbe deeds. (1) A deed was made to them by tbe Walnut Mercantile Company with tbe assumption of Allie A. Cromwell’s note. (2) After they bad purchased tbe stock they then made a deed back to tbe Walnut Mercantile Company with tbe assumption of Allie A. Cromwell’s note. They took both deeds to Marshall, N. C., and recorded them about ten days after tbe deal was made. Tbe deeds were dated 7 September, 1926. Tbe stock of merchandise was in tbe building tbat Allie A. Cromwell bad a second lien on. They ran tbe business about fifteen months. They purchased tbe business 7 September, 1926, and this $4,000 note was due 12 December, 1926, and tbe deed of trust could have been foreclosed at tbat time. 28 September, 1926, Carl M. Logan wrote Allie A. Cromwell (Ralph Beacbam testified, “I knew about tbe letter Logan wrote Mrs. Cromwell”) : “We would like to get you to extend your note one year, and we will start paying you $50 and interest each month for one year, and then pay all tbe balance December, 1927.” Ralph Beacbam testified, “Tbe attorney made no representations. Tbe attorney is a man of good character.” Other indicia of negligence and ratification: (1) By raising no question as to tbe personal liability until they were sued in tbe courts, and in tbe meantime having tbe deeds showing tbe assumption of Allie A. Cromwell’s debt. (2) By defendant Logan obtaining from one Wilkins at personal cost to him, a release from the first mortgage against the real estate, which amounted to $14,000. (3) By attempting to pay the $4,000 note by the transfer and delivery to Allie A. Cromwell of certain promissory notes, payable over a period of twenty years, which were the personal property of the defendant, Logan, and in which the Walnut Mercantile Company had no interest whatsoever.

On the entire record we think there is no sufficient evidence to sustain the verdict, and the motion for judgment as in ease of nonsuit should have been granted. For the reasons given the judgment is

Reversed.