Case ID: nc_127/html/0454-01.html
Source: Caselaw Access Project
Author: {"author": "Montgomery, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

AUSTIN v. MURDOCK.
    (December 22, 1900.)
    1. Parties — Corporation—Subscriptions■—Fraud—Deceit.
    Where persons are sued for fraud and deceit in procuring subscriptions to a future corporation, the corporation is not a necessary party defendant.
    2. Corporations — Flection of Remedies — Stock—Subscrip-. lions — Fraud—Deceit.
    Where persons seek to recover for fraud in inducing them to subscribe for stock in a future corporation, they are not bound to seek redress from the corporation before suing those who had practised the fraud.
    3. Evidence — Sufficiency■—Corporations—Fraud—Deceit.
    Evidence in this case held sufficient to be submitted to the jury on the question whether certain parties were induced by fraud and deceit to subscribe for.stock in a future corporation.
    Civil ActioN by J. I). Austin, TI. T. Sawyer, R. W. Ivey, G. O. Heglar, W. M. Ivey, H. S. Trott, *J. L. Palmer, Richard Carmon, J. L. Culp, Cline Austin, R. J. Ross, J. L. Palmer, and B. E. Ivey, executors of J. R. Ivey, deceased, against E. J. Murdock, N. B. McCanless, and The Silver Springs Cordage Company, a corporation, heard by Judge T. A. McNeill and a jury, at December Term, 1899, of Stanuy Superior Court. Erom an order dismissing the complaint and directing a nonsuit, the plaintiffs appealed.
    
      Montgomery & Crowell, for the plaintiff.
    
      Lee S. Overman, for the defendants.
   Montgomery, J.

This action was brought by the plaintiffs against the defendant for an alleged fraud and deceit practiced on tbe plaintiffs by; tbe defendant in tbe procurement of certain subscriptions, in money and notes, for tbe purpose of buying machinery to be used by a corporation thereafter to be formed, and to consist of tbe subscribers, tbe defendant, and others. Tbe corporation, Tbe Silver Springs Cordage Company, and one McOanless, were also made defendants, but nonsuits have been taken as to them. The defendant, in bis answer, denied all tbe allegations of fraud and deceit alleged in tbe complaint. Upon tbe reading of tbe pleadings tbe defendant moved to dismiss the complaint because it did not state a cause of action, for that (1) “The complaint does not show that tbe representations made by tbe defendant bound the corporation; (2) that tbe complaint does not allege that upon tbe discovery of tbe fraud alleged tbe plaintiffs immediately dis-affirmed the contract; (3) that from the admissions in the pleadings and the plea in avoidance, not -denied, shows an affirmation and ratification of the contract; (4) that the complaint does not allege that the plaintiffs made any effort to get redress within tbe corporation, or requested any action taken; (5) because the corporation and the stockholders are not made parties to the action.” The motion was not acted on at the time, but at tbe close of the evidence his Honor adjudged that “upon an examination of tbe record and tbe pleadings in tbe case, and upon tbe motion of the defendant to nonsuit plaintiff at the close of the testimony, the said motion be allowed.”

The corporation was in no way involved in the matter of which the plaintiffs complain of the defendants. It was alleged in tbe complaint that before tbe corporation was formed tbe plaintiffs were induced to pay money and to subscribe for stock in tbe corporation by tbe false statements of tbe defendant — the statements alleged to have been known to be false when made. If such was tbe fact, tbe defendant was liable, and tbe corporation had no connection with the matter. • Cooley, Torts, p. 504. And for the same reason the plaintiffs were not put to their election between the remedy they chose to seek and any other. The matter set np in the answer in avoidance does not profess to relieve the defendant in the matter of which the plaintiffs complain, and, besides, did not exist when the action was commenced, but occurred afterwards. The correctness of his Honor’s ruling depends, then, on whether there was any evidence which ought to have been submitted to the jury on the issues joined between the parties. It seems that a majority of the plaintiffs (in number and in value of stock) testified on the trial that they had not been injured by the representations (made in a public . address) of the defendant, for they had paid nothing, and severa] of the largest said that they claimed no damages. And several said that the defendant himself expressed disappointment at the machinery when it arrived, declaring it was not such as it was represented to him to be. The plaintiffs, Palmer and Cannon, testified that Will Ivey induced them to subscribe, and it appeared that Ivey was employed about the machinery, after it was put in place, at $1.75 per day, but that he could not run it, and another person was employed in his place. Certainly the evidence of the last-named witness, and that of his father, both of whom testified that they subscribed in money and notes to the stock of the corporation, and upon the representations of the defendant, was more than a scintilla and the jury should have had it, with all the competent evidence in the case, submitted to them upon the issues between the parties, with proper instructions from his Honor.

New trial.