Luff v. Levey, 203 N.C. 242 (1932)

Sept. 28, 1932 · Supreme Court of North Carolina

203 N.C. 242

HENRY LUFF v. JOSEPH LEVEY and RACHEL LEVEY.

(Filed 28 September, 1932.)

Cancellation of Instruments B d — Evidence in this case held insufficient to establish fraud, duress or failure of consideration.

Where the evidence discloses that a mortgage creditor of a corporation agreed to lend it more money for reorganization after its buildings were destroyed by fire, the money to be used to buy other lands and replace the buildings and a new corporation to be formed for the purpose of carrying on the business, and that during negotiations the creditor discovered that one of the organizers had had the new property conveyed to him in his own name, and upon the creditor’s insistence agreed to convey the property to the new corporation if the creditor would assign to him a part of the bond to be secured by the corporation’s mortgage on the property: Held, the evidence is insufficient to establish fraud or duress in the execution of the assignment, and the execution of a release by the assignee together with other negotiations between the parties constituted a sufficient consideration.

Civil action, before Schenck, J., at May Term, 1931, of Mooke.

Tbe pleadings and evidence tended to show that the United Talc and Crayon Company, Incorporated, executed a mortgage deed to the defendant, Bachel Levey, to secure a bond in the sum of $15,200 upon certain land known as the Talc Mine, and that on 23 November, 1927, the building and machinery on said land used in operating the mine was burned and destroyed by fire; that thereafter the defendants and the agent of plaintiff entered into negotiations to purchase a lot of land for the purpose of erecting a new building for mining purposes, said land to be conveyed to a new corporation to be organized and known as United Talc and Crayon Manufacturing Company; that thereupon tbe defendants agreed to loan to tbe new corporation to be used in tbe development of tbe business an additional sum of $10,000. Tbe plaintiff undertook to close tbe transaction and purchased tbe land, taking deed thereto in bis own name. Tbe defendants demanded security for tbe additional money advanced to tbe new enterprise, and in tbe negotiations discovered that tbe title to tbe property was not in tbe name of tbe new corporation but in tbe name of plaintiff.

Tbe evidence for defendants further tended to show that tbe plaintiff refused to convey tbe land to tbe corporation unless tbe defendants would turn over to him $5,000 of tbe proceeds of tbe $15,200 mortgage. Thereupon tbe defendants executed an assignment, dated 30 June, 1928, and recorded 7 July, 1928. In substance tbe assignment provides that tbe defendants have “sold and assigned and set over” to tbe plaintiff and bis personal representatives “tbe sum of $5,000 of tbe principal of tbe note of bond in tbe sum of $15,200, made by United Talc and Crayon Company, Incorporated, payable to Mrs. Rachel Levey, dated 24 March, 1927, secured by a mortgage deed on certain real estate in Moore County. . . . Tbe said sum of $5,000 and interest shall first be paid to said Henry Luff and bis personal representatives before tbe said parties of tbe first part (defendants) shall participate in any amount of money which said real estate may bring at any sale under foreclosure for said mortgage.” Tbe defendants 'admitted tbe execution of said assignment but offered evidence which they assert tended to show that tbe assignment was procured by means of fraud, duress and without consideration. Tbe assignment was drawn by a reputable attorney and tbe defendant, Joseph Levey, testified that tbe plaintiff said to him: ‘I won’t turn over tbe property until you give me $5,000,’ and I bad to decide one way or tbe other.” He further testified that tbe plaintiff’s agent said: “If you will give me $5,000 as a bonus, I will convey this property from Henry Luff to tbe new corporation, and you will get your mortgage,” to which tbe defendant replied: “Why should I give you $5,000?” to which tbe plaintiff’s agent replied: “Just because I want it.”

Tbe plaintiff alleged that $2,000 bad been paid on tbe assignment and sued to recover $3,000 with interest thereon.

Tbe court ruled that tbe burden of proof was upon tbe defendant and submitted tbe following issues:

1. “Was the execution of tbe assignment sued on, from Joseph Levey and bis wife, Rachel Levey, to tbe plaintiff, Henry Luff, obtained by fraud, as alleged in tbe further defense?”

2. “Was the execution of the assignment sued on, from Joseph Levey and his wife, Eachel Levey, to the plaintiff, Henry Luff, obtained by duress as alleged in the further defense ?”

3. “What amount, if any, remains unpaid by the defendants, Joseph Levey and his wife, Eachel Levey, to the plaintiff, Henry Luff, on said assignment ?”

4. “Is the plaintiff, Henry Luff, entitled to a foreclosure of the mortgage referred to in the assignment recorded in Book 49, at page 336 of the records of mortgage deeds of Moore County?”

Thereupon the trial judge instructed the jury, if they found “the facts to be as shown by all the evidence both oral and documentary” to answer the first issue “no,” the second issue “no,” the third issue “$3,000 with interest,” and the fourth issue “yes.”

From judgment upon the verdict the defendants appealed.

A. A. F. Seawell, K. R. Hoyle, W. R. Glegg and L. B. Clegg for plaintiff.

J. A. Spence, O. A. Douglass and R. L. McMillan for defendants.

Per Curiam.

The defendants seek to set aside an assignment of the proceeds of a certain note owned by the feme defendant, upon the ground of fraud, duress and failure of consideration. The only evidence of fraud offered at the trial was to the effect that the plaintiff, acting through an agent, refused to convey a tract of land to a corporation in which both plaintiff and defendants were interested and to have a mortgage executed thereon and delivered to the defendants as security for sums advanced by the defendants to the new enterprise. We perceive no element of fraud in this phase of the transaction, nor is there any evidence of duress as contemplated and defined by law. The defendants had a right to stand upon their legal rights and assert them in a court of justice. The applicable rule of law is tersely stated in Smithwick v. Whitley, 152 N. C., 369, 67 S. E., 913, as follows: “Duress exists where one, by the unlawful act of another, is induced to make a contract or perform or forego some act under circumstances which deprive him of the exercise of free will.” The testimony offered at the trial was not of sufficient or definite probative value to be submitted to the jury. Moreover, on 7 July, the date of the recording of the assignment in controversy a certain release was executed and recorded, and this, together with other negotiations between the parties, constituted a consideration, sufficient in law to support the contract.

No error.