Union Guano Co. v. Hearne, 172 N.C. 398 (1916)

Nov. 9, 1916 · Supreme Court of North Carolina

172 N.C. 398

UNION GUANO COMPANY v. G. W. HEARNE, J. T. GIBSON and Wife, LAURA.

(Filed 9 November, 1916.)

Judgments — Excusable Neglect — Meritorious Defense.

Where two parties have signed a contract, jointly, for the purchase of fertilizer, upon the understanding and agreement that each of them would separately he charged with the part he received, but that the joint contract was to enable the shipment to be made in a car-load lot, the purchasers gave their separate notes, and upon demand of seller’s attorney for payment and threat of suit, each for his own part said he would not resist judgment, and separate suits are brought, but thereafter consolidated with allegations affecting the personal integrity of the defendants, without the knowledge of either of them, and judgment is accordingly taken, the failure of the. defendants to appear and answer is held to be excusable neglect, and a meritorious defense as to each having been shown, the judgment should be set aside.

This is a motion to set aside a judgment, heard by Btarbuclc, J., in the County Court of Forsyth County. From an order setting aside the judgment, plaintiff appealed to the Superior Court. At September Term, 1936, of said court, Long, J., reversed the order, and defendants appealed to Supreme Court.

Tbe following are the facts found by Judge Starbuck:

1. On 18 May, 1915, the plaintiff instituted an action against the defendant G. W. Hearne, returnable to the June Term, served 22 May, 1915, he being the sole defendant named in said summons.

2. On 22 May, 1915, said plaintiff instituted an action against the defendants T. J. Gibson and his wife, Mrs. Laura M. Gibson, and the summons in said action, returnable to the June term, was personally served 24 May, 1915, T. J. Gibson and Laura M. Gibson being the only defendants named in said summons..

3. On 31 May, 1915, plaintiff 'filed the complaint in the record against all the defendants, said complaint being filed in the action brought against T. J. Gibson and Laura M. Gibson.

4. At the return term, beginning 14 June, 1915, the said action against G. W. Hearne was, on motion of the plaintiff, ordered consolidated with said action against T.. J. Gibson and Mrs. Laura M. Gibson.

5. No answer having been filed, judgment by default and inquiry was rendered at said June term., as appears of record.

6. At the next term, being in the month of September, an issue was submitted to the jury and answered, and final judgment was rendered, all appearing of record.

I. No appearance was ever entered by said defendants or by counsel for them, and the defendants had no knowledge or information as to the consolidation of the actions or as to the nature of the complaint or the judgments rendered, until the transcript of the final judgment was sent to Eichmond County to be docketed, 30 November, 1915.

8. Executions having been issued, the exemptions of said defendants were laid off 20 January, 1916.

9. On 20 January, 1916, defendants caused notice of this motion to be served on the plaintiff’s counsel.

10. Four terms of the Forsyth County Court intervened between the September term, when final judgment was rendered, and the date of the service of this motion, the last term beginning 4 December.

II. Part of the fertilizer mentioned in the contract, which is made part of the complaint, was ordered by defendant Hearne, and the residue by defendant T. J. Gibson. The contract was executed by all the defendants, pursuant to representations made by plaintiff’s selling agent to Hearne to the effect that he would be charged only with the fertilizers he ordered and would not be held responsible for that ordered by Gibson, but that the signing of one contract would be desirable, so that solid cars could be shipped, thereby getting lower freight rates, and pursuant to similar representations made by said agent to T. J. Gibson as to the effect of the signing of the contract by himself and wife.

1114. Tbe secretary of tbe plaintiff company approved said contract, relying upon tbe financial responsibility of said Hearne, said Gibson being reputed insolvent, and a suit was tben pending against bim and bis wife to set aside a conveyance in fraud of creditors.

12. Tbe defendant. Hearne executed and sent to tbe plaintiff bis separate notes, wbicb, in tbe aggregate, were equal to tbat part of tbe fertilizer shipments covered by tbe contract, wbicb it was understood between bim and tbe agent tbat be was having consigned to himself, and tbe defendant T. J. Gibson executed and ¡sent to tbe plaintiff bis separate notes, indorsed by bis said wife, wbicb in tbe aggregate were equal to tbe price of tbat part of tbe shipments which it was understood was to be consigned to T. J. Gibson.

13. Subsequently, and before tbe institution of said actions, tbe defendant Hearne paid and took up one of bis said notes, leaving the balance due on bis remaining notes of $324.48, with interest, and Gibson paid and took up one of bis said notes, leaving tbe balance due on bis remaining notes of $440.25.

14. Prior to the institution of tbe said actions, Mr. E. P. Yates, an attorney of the plaintiff, demanded of tbe defendant Hearne payment of bis unpaid notes. Hearne stated be could not pay tbe notes at tbat time. Said attorney thereupon stated suit would be instituted against bim to recover judgment, and was told by Hearne tbat be, Hearne, could not resist judgment, and tbat be would pay tbe judgment' as soon as he could.

15. Tbe said attorney made similar demand on tbe defendant T. J. Gibson, and a like conversation took-place between them.

16. Tbe defendants did not appear in said actions or resist judgment, for tbe reason tbat tbe defendant Hearne believed tbat judgment would be rendered against bim only for tbe amount of tbe unpaid notes executed by bim, and tbe defendant Gibson and bis wife believed tbat judgment would be recovered against them only for tbe amount of tbe unpaid notes executed by said defendant T. J. Gibson and indorsed by bis wife.

17. The defendant Hearne has a prima, facie meritorious defense to tbe action in so far as it charges bim with fraudulent misapplication or embezzlement, and seeks to bold bim answerable for tbat part of the fertilizer consigned to’ Gibson, and tbe defendants T. J. Gibson and wife, Laura M. Gibson, have a prima facie meritorious defense to tbe action in so far as it charges them with fraudulent misapplication or embezzlement, and seeks to bold them answerable for tbat part of tbe fertilizer consigned to tbe defendant Hearne.

Louis M. Swinlc, Gilmer Korner for plaintiff.

A. E. McPhaál for defendants.

Browk, J.

It will be seen from tbe statement of facts that plaintiff instituted two separate and distinct actions, one against Heame and the other against Gibson and wife, evidently based upon two- distinct and unrelated causes of action, viz., the notes referred to in findings 12 and 13. From the conversation referred to in findings 14 and 15 the defendants were undoubtedly led to believe that the purpose of the two'suits was to collect the individual notes of defendants, upon which they were not ¡jointly liable, and that separate and distinct judgments would be taken. That was a reasonable inference to be drawn from the statements of the plaintiff’s attorney, and the court finds that defendants did not appear for that reason.

Instead of taking distinct judgments upon the notes against each defendant, the two actions were consolidated without their knowledge and a complaint filed against the defendants jointly, setting up a very different cause of action, and one affecting their personal integrity, upon which judgment was taken by default and the inquiry duly made at a subsequent term.

From the findings of fact it is manifest that the defendants were naturally misled by plaintiff’s attorney (whether intentionally or not is immaterial), and thereby prevented from employing counsel and entering appearance. If they were reasonably misled by such conduct, in consequence of which they failed to appear, then it is excusable neglect. Morris v. Ins. Co., 131 N. C., at p. 215.

The judge of the county court has found that defendants were excusable in their neglect, and that they have a meritorious defense, in which judgment we concur. ' .

The judge of the Superior Court erred in reversing order of the county court.

Error.