Abbitt v. . Gregory

160 S.E. 896, 201 N.C. 577, 1931 N.C. LEXIS 43

• Court: Supreme Court of North Carolina
• Decided: November 4, 1931
• Status: Published

Opinion

CoNNOR, J.

The exceptions filed by the defendants, Willis N. Gregory and the Davison Chemical Company, to the findings of fact set out in the report of the referee in this action, and also in his reports in the other actions pending in the Superior Court of Pasquotank County against these defendants, were chiefly on the ground that there was no evidence at the hearing of said actions by the referee to support said findings of fact. These exceptions were without merit, and were properly overruled by Judge Grady. There was ample evidence, as the learned and careful judge found, to support these, as well as the other findings of fact made by the referee, and set out in his several reports. These findings of fact were substantially the same.

The essential facts on which the plaintiffs in these actions rely as constituting their cause of action against the defendants, certainly as distinguished from inferences and conclusions from these facts, are not seriously controverted. It was admitted that the plaintiff in each of these actions was a stockholder of the Eastern Cotton Oil Company, owning the number of shares of said stock as alleged by him in his complaint; that all said plaintiffs sold and delivered to the defendant, Davison Chemical Company, the shares of stock in said company owned by tbem; and that these sales were made as the result of negotiations conducted by the defendant, Willis N. Gregory, with the defendant Davison Chemical Company. It was admitted that at the time these negotiations were begun, and at the time these sales were made, the defendant, Willis N. Gregory, was the general manager of the Eastern Cotton Oil Company, and that his relations, both business and social, with each of the plaintiffs, were such that said plaintiffs had and were justified in having implicit confidence in the said Willis N. Gregory, not only as the general manager of the corporation, but also as a friend of long standing. It was admitted that each of the plaintiffs received from the defendant, Davison Chemical Company, as the price of his stock, the sum of $106.00 per share, and that prior to the sale of said stock, and during the negotiations for its purchase by the Davison Chemical Company, the defendant, Willis N. Gregory, with the full knowledge of the defendant, Davison Chemical Company, told the plaintiffs, or their representatives, that the sum of $106.00 per share was the highest price which the said Davison Chemical Company would pay for said stock. It was not denied that.during the progress of the negotiations, which the defendant, Willis N. Gregory, conducted with the defendant, Davison Chemical Company, for the sale of the. stock in the Eastern Cotton Oil Company owned by the plaintiffs, a secret agreement was entered into by and between the said Willis N. Gregory and the said Davison Chemical Company, by which the defendant, Davison Chemical Company, agreed to pay to the defendant, Willis N. Gregory, upon the conclusion of said negotiations, and upon the sale of said stock to the said Davison Chemical Company by the plaintiffs, the sum of $150,000 in cash; nor was it denied that pursuant to said secret agreement, upon the sale of said stock to the Davison Chemical Company by the plaintiffs, the defendant, Davison Chemical Company, paid to the defendant, Willis N. Gregory, a sum of money aggregating about $150,000, which added to the total amount paid by said company to the plaintiffs in these actions, for their stock in the Eastern Cotton Oil Company, resulted in the payment by the defendant, Davison Chemical Company, for each share of said stock, of the sum of $158.86; of this sum, each of said plaintiffs received for his stock $106.00 per share; the balance, to wit: $52.86 was paid by the defendant, Davison Chemical Company to the defendant, Willis N. Gregory. There was ample evidence to justify, if not to require, the inference and conclusion made by both the referee and the judge, that the defendant, Davison Chemical Company, entered into the secret agreement with, and paid the sum of $52.86 per share, to the defendant, Willis N. Gregory, with full knowledge that the said Willis N. Gregory was the general manager of the Eastern Cotton Oil Company, and also that his relations, both business and social, with the stockholders of said company, whose stock it proposed to buy, were such that said stockholders had implicit confidence in the business judgment and personal integrity of the said "Willis N. Gregory, and because of such confidence would act and did act upon his representation that said company would not pay more than $106.00 pér share for their stock in the Eastern Cotton Oil Company. There was ample evidence also tending to show that the defendant Davison Chemical Company paid to the defendant, Willis N. Gregory, and that the defendant, Willis N. Gregory, received from the defendant, Davison Chemical Company, the sum of $52.86 per share for the stock sold to the said Davison Chemical Company by the plaintiffs, as compensation for his services in procuring for said company the control of the Eastern Cotton Oil Company by the purchase from the plaintiffs of their stock in said company at $106.00 per share. The contention of the defendants that the said sum of $52.86 per share was paid by the Davison Chemical Company to Willis N. Gregory as compensation for his “changed position” as a stockholder in the Eastern Cotton Oil Company resulting from the sale by the plaintiffs of their stock to the Davison Chemical Company, and also as compensation for his agreement to retain an official connection with the Eastern Cotton Oil Company, after the purchase of said stock from the plaintiffs by the Davison Chemical Company, while colorable, was not sustained by either the referee who heard, or by the judge, who reviewed the evidence. All the evidence justifies their rejection of this contention. The records of the Davison Chemical Company, which appear in the evidence, refute this contention of the defendants. Their contention that these records were made for the purpose of concealing the true transaction with respect to the purchase of the stock in the Eastern Cotton Oil Company from the plaintiffs, in order to comply with the laws of the State of Maryland, and in order to meet the requirements of the New York Stock Exchange, at least, does not aid the defendants in a court which requires of all litigants that they come within its portals with clean hands and which looks beneath the forms of all transactions to discover, if it can, the true intention of the parties.

On their appeal to this Court, the defendants contend that there were errors in procedure at the hearing by the judge of their exceptions to the report of the referee in this action, and that for these errors,, which appear therein, the judgment should be set aside, and a new trial ordered.

Defendants contend, first, that it was error for the judge, on his own motion, to consolidate the several actions pending in the Superior Court of Pasquotank County against the defendants, for the purpose of bearing the exceptions filed by both the plaintiffs and the defendants to the reports of the referee in said actions; and, second, that it was error for the judge to fail to rule on each exception, specifically, and in lieu thereof to rule generally that such exceptions as it appeared from his judgment were not overruled, were sustained, and that such exceptions as it appeared therefrom were overruled, were not sustained.

With respect to the power of a trial judge to order the consolidation of two or more actions for purposes of trial and judgment, it is said in Durham v. Laird, 198 N. C., 695, 153 S. E., 261, that “the general rule is that the trial judge has the power to consolidate actions involving the same parties and the same subject-matter, if no prejudice or harmful complications will result therefrom. This salutary power is vested in the judge in order to avoid multiplicity of suits, unnecessary costs and delays, and as a protection against oppression and abuse. Blount v. Sawyer, 189 N. C., 210, 126 S. E., 512; Fleming v. Holleman, 190 N. C., 449, 130 S. E., 171; Rosenmann v v. Belk-Williams Co., 191 N. C., 493, 132 S. E., 282. Whether the order of consolidation is entirely discretionary and not reviewable on appeal, is an open question in this jurisdiction. Wilder v. Green, 172 N. C., 94, 89 S. E., 1062. The whole subject is discussed with singular clearness and accuracy in McIntosh on North Carolina Practice and Procedure, pp. 536-539, where all the pertinent authorities in this State are assembled.” Prof. McIntosh says: “The Court has arranged the cases in which a consolidation may be made into three classes: ‘(1) where the plaintiff could have united all his causes of action in one suit, and has brought several, and these causes of action must be in one and the same right, and a common defense is set up to all; (2) where separate suits are instituted by different creditors to subject the same debtor’s estate; (3) where the same plaintiff sues different defendants, each of whom defends on the same grounds, and the same question is involved in each.’ These may not embrace all the cases, but they serve to illustrate the rule by which the court is governed in ordering such union. The last class might also include actions by different plaintiffs against the same defendant, where the facts are substantially the same.”

The principle on which the rule governing the consolidation of two or more actions is founded, supports the order of the judge in the instant case, consolidating the actions tried by him on the exceptions to the reports of the referee, and there was no error in said order, notwithstanding there were different plaintiffs in said actions. The actions were against the same defendants, and involved the same questions both of fact and of law. They had been heard by the referee at the same time and at the same place by consent of all parties, and bis findings of fact and conclusions of law, as shown by his several reports in said actions, were substantially the same.

It is undoubtedly the practice in this State on the hearing of exceptions to the report of a referee for the judge to consider and rule on each exception, and in accordance with his rulings to sustain or overrule the. exeej>tions, specifically. It is ordinarily his duty to do so. Miller v. Groome, 109 N. C., 148, 13 S. E., 840. In that case it is said that when either party to an action which has been tried by a referee files exceptions to his report, it is the duty of the judge, in reviewing the report, to consider and rule on the exceptions, and to set aside, modify or confirm the report according to his judgment. It is error for the judge to decline to consider the evidence set out in the referee’s report, and to confirm the report without ruling on the exceptions. He must consider and rule on the exceptions, judicially, before rendering his judgment.

In Thompson v. Smith, 156 N. C., 345, 72 S. E., 379, it is said: “When exceptions are taken to a referee’s findings of fact and law, it is the duty of the judge to consider the evidence and give his own opinion and conclusion, both upon the facts and the law. He is not permitted to do this in a perfunctory way, but he must deliberate and decide as in other cases — use his own faculties in ascertaining the truth and form his own judgment as to fact and law. This is required not only as a check upon the referee, and a safeguard against any possible errors on his part, but because he cannot review the referee’s report in any other way. The point was presented clearly and directly in Miller v. Groome, 109 N. C., 148, and it controls this case.”

In Dumas v. Morrison, 175 N. C., 431, 95 S. E., 775, where the real question involved in the appeal by the plaintiff was whether the judge had the power to set aside the findings of fact made by the referee, and to find the facts anew from the evidence taken and reported to the court by the referee, it is said:

“It is not denied that the judge has the power to review and revise the report, but the contention is that he must restrict his rulings to the specific exceptions which has been taken by either party. If this be true, and the judge’s power is not any broader than as stated by the plaintiff, we have shown that the exceptions are of such a nature and so comprehensive as to bring this case well within the restricted statement of the rule. The statute, however, gives a wider scope to the judge’s power in dealing with the report of a referee. Eevisal, sec. 524 (now O. S., 578), provides that the report of the referee shall be made to the clerk of the court in which the action is pending; either party, during the term, or upon ten days notice to the adverse party, out of term, may move the judge to review such report, and set aside, modify or confirm the same, in whole or in part, and no judgment shall be entered on any reference except by order of the judge.”

In Trust Co. v. Lentz, 196 N. C., 398 (at page 406), 145 S. E., 776, it is said: “In view of the position taken by some of the parties that the judge was without authority to change the report of the referee— the reference being by consent — it is sufficient to say that, in a consent reference, as well as in a compulsory one, upon exceptions duly filed, the judge of the Superior Court, in the exercise of his supervisory power and under the statute, may affirm, modify, set aside, make additional findings, and confirm, in whole or in part, or disaffirm the report of a referee. Contracting Co. v. Power Co., 195 N. C., 649, 143 S. E., 241; Mills v. Realty Co., 196 N. C., 223, 145 S. E., 26.”

In the instant ease, after a careful consideration of the referee’s report, and of the exceptions thereto filed by both the plaintiff and the defendants, and after fully reviewing all the evidence taken by the referee at the hearing of this and the other actions pending in both the State and the Federal Court against the defendants, the judge concluded that the findings of fact made by the referee and set out in his report in this and in each of the other actions, were amply supported by the evidence. In accordance with these conclusions, the judge overruled all the exceptions to the findings of fact made by the referee. He ajoproved these findings of fact, and for the purpose of rendering his judgment in this action, he restated, in his own language, such findings of fact as he deemed pertinent to said judgment. In this, there was no error. There is no substantial difference between the facts as found by the referee, and as stated by the judge in his judgment. The action of the judge is fully supported by the authorities above cited.

Upon the findings of fact made by him, the referee concluded as a matter of law, that during the negotiations which the defendant, Willis N. Gregory, conducted with the defendant, Davison Chemical Company, for the sale of the stock in the Eastern Cotton Oil Company owned by the plaintiff, a fiduciary relation existed between plaintiff and the said Willis N. Gregory, with respect to the sale of plaintiff’s stock; that by reason of such fiduciary relation, it was the duty of the defendant, Willis N. Gregory, to disclose to plaintiff the existence of any and all personal interest which he had or might have in the successful termination of such negotiations; that the failure of the said Willis N. Gregory to disclose to the plaintiff the existence of the agreement between him and the defendant, Davison Chemical Company, as the result of which, the said Davison Chemical Company paid to the defendant, Willis N. Gregory, upon the successful termination of said negotiations, for each share of stock sold by the plaintiff to the said Davison Chemical Company, the sum of $52.86 in addition to the sum of $106.00 which the said Davison Chemical Company paid to the plaintiff for such share of stock, was a breach of the duty which the defendant, Willis N. Gregory, owed to the plaintiff; and that because of this breach of duty, the plaintiff is entitled to recover of the defendant, Willis N. Gregory, the sum of $52.86, for each share of stock sold by the plaintiff to the Davison Chemical Company, the said sum having been received by the said Willis N. Gregory, and wrongfully retained by him.

Upon his findings of fact that the defendant, Davison Chemical Company, knew of the existence of the fiduciary relation between the plaintiff and the defendant, Willis N. Gregory, and with such knowledge entered into the secret agreement with the said Willis N. Gregory, as the result of which the said defendant paid to the said Willis N. Gregory the sum of $52.86 for each share of stock in the Eastern Cotton Oil Company, sold to said company by the plaintiff, the referee concluded as a matter of law that the plaintiff is entitled to recover of the defendant, Davison Chemical Company, the sum of $52.86 for each share of stock sold by the plaintiff to said company, the said sum having been wrongfully paid by the said Davison Chemical Company to the defendant, Willis N. Gregory, who with its knowledge and by its aid has failed to account to plaintiff therefor.

The foregoing conclusions of law were approved and confirmed by the judge. In accordance therewith, judgment was rendered that plaintiff recover of the defendants the sum of $3,753.06, with interest at six per cent from 6 May, 1926. Defendants contend that there is error in this judgment for that upon all the facts found by the referee, and approved by the judge, the plaintiff is not entitled to recover of the defendants, or of either of them.

For the purpose of determining the correctness of the conclusion of law made by both the referee and the judge on the facts found by them, that a fiduciary relation existed between the plaintiff and the defendant, Willis N. Gregory, with respect to the sale by the plaintiff of his stock in the Eastern Cotton Oil Company to the Davison Chemical Company, it is immaterial whether the relation between them was that of principal and agent, as suggested by the referee in his report. This is a fiduciary relation, but it is by no means the only relation which the law regards as fiduciary in its nature. And so, upon the facts found by both the referee and the judge, it is not necessary in the instant case for this Court to decide whether the facts that the defendant, Willis N. Gregory, was the general manager, and the plaintiff was a stockholder of the Eastern Cotton Oil Company, are sufficient, in law, to constitute a fiduciary relation between them with respect to the sale of said stock. The courts generally have declined to define the term “fiduciary relation” and thereby exclude from this broad term any relation that may exist between two or more persons with respect to the rights of persons or property of either. In this, the courts have acted upon the same principle and for the same reason as that assigned for declining to define the term “fraud.” The relation may exist under a variety of circumstances; it exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. “It not only includes all legal relations, such as attorney and client, broker and principal, executor or administrator and heir, legatee or devisee, factor and principal, guardian and ward, partners, principal and agent, trustee and cestui que trust, but it extends to any possible case in which a fiduciary relation exists in fact, and in which there is confidence reposed on one side, and resulting domination and influence on the other.” 25 O. J., 1119. In Pomeroy’s Equity Jurisprudence, Yol. 2, sec. 956 (3d ed.), it is said: “Courts of equity have carefully refrained from defining the particular instances of fiduciary relations in such a manner that other and perhaps new cases might be excluded. It is settled by an overwhelming weight of authority that the principle extends to every possible case in which a fiduciary relation exists as a fact, in which there is confidence reposed on one side, and the resulting superiority and influence on the other. The relation and the duties involved in it need not be legal; it may be moral, social, domestic or merely personal.”

There was no- error in the conclusion of law, upon the facts established in this case, that a fiduciary relation existed between the plaintiff and the defendant, Willis N. Gregory, with respect to the sale of plaintiff’s stock to the defendant, Davison Chemical Company. By reason of this relation the law imposed upon the defendant, Willis N. Gregory, the duty to make a full disclosure of all the facts and circumstances affecting the proposition of the Davison Chemical Company to buy plaintiff’s stock in the Eastern Cotton Oil Company. This the defendant, Willis N. Gregory, did not do. He not only failed to advise plaintiff of the true value of his stock, this value being determined largely by what the Davison Chemical Company would pay for it, but he falsely and, we think, fraudulently concealed from the plaintiff and his fellow-stockholders the admitted fact that the Davison Chemical Company bad agreed to pay for said stock a sum of money wbicb in fact amounted to at least tbe sum of $158.86 per share. The Davison Chemical Company has paid this sum per share for plaintiff’s stock. Plaintiff has received of this sum only $106.00. Willis N. Gregory has received the balance, to wit: $52.86, which he wrongfully retains. In equity and good conscience, he must pay this sum to the plaintiffs, as the court has adjudged.

The defendant, Davison Chemical Company, entered into the secret agreement with Willis N. Gregory to pay to him, and pursuant to said agreement did pay to him the sum of $52.86 per share for each share of stock purchased by said company from the plaintiff, with frill knowledge of the facts which constituted a fiduciary relation between the plaintiff and the said Willis N. Gregory. For this reason, the defendant, Davison Chemical Company, is liable to plaintiff for said sum of money. There is no error in the judgment that plaintiff recover of the defendants, Willis N. Gregory and Davison Chemical Company, the sum of $3,753.06, with interest at the rate of six per centum from 6 May, 1926. The judgment is

Affirmed.