Pickett v. Overman, 228 N.C. 437 (1947)

Dec. 19, 1947 · Supreme Court of North Carolina

228 N.C. 437

M. G. PICKETT, E. F. McLENDON and A. B. MANGUM v. J. R. OVERMAN.

(Filed 19 December, 1947.)

Cancellation of Instruments § 9—

In plaintiffs’ action for specific performance of defendant’s agreement to sell stock in a close corporation, defendant admitted the allegations of the complaint but alleged in effect that lie was induced to sign the contract by false representations as to the value of the stock and threats made by plaintiffs that if he did not sell, plaintiffs, through their majority control, would deprive defendant of future dividends on the stock and the bonus theretofore annually paid to stockholders. Seld: Defendant’s answer alleges fraud, undue influence and coercion practiced by plaintiffs in procuring defendant’s execution of the contract, and judgment on the pleadings decreeing specific performance on the ground that the answer was insufficient to allege legal fraud, is reversed.

Appeal by defendant from Bone, J., September Term, 1947, Ala-maNce.

Beversed.

Civil action to compel specific performance of a contract to convey capital stock in a close corporation.

Glenover Hosiery Mills, Inc. is a close corporation. Its stock consists of 380 shares of which plaintiffs own 270 shares and defendant owns 90 shares.

The defendant, answering the complaint filed, admits the contract, demand, tender, and ability of plaintiffs to perform on their part. In further defense he avers that the said contract is not binding and enforceable “for the reason that he was induced to sign the same by the fraud, duress and coercion of the plaintiffs, as hereinafter set out.” Thereafter he pleads the representations, acts, and conduct of plaintiffs which he contends constitute fraud, undue influence and coercion.

When the cause came on for trial, after plaintiffs had offered in evidence the admissions contained in the answer, the court “being of the opinion that the facts so alleged do not constitute legal fraud and are not sufficient to bar plaintiffs’ right to recover upon said written agreement,” and that on the facts alleged and -admitted, plaintiffs are entitled to specific performance thereof, entered judgment on the pleadings decreeing specific performance as prayed. Defendant excepted and appealed.

Cooper, Sanders & Holt for plaintiff appellees.

Thos. C. Carter and W. D. Madry for defendant appellant.

BaeNhill, J.

The one question presented for decision on this appeal is this: Are the facts alleged in defendant’s answer and further answer sufficient to constitute a plea of fraud, undue influence and coercion practiced by plaintiffs in procuring defendant’s execution of tbe contract set out in tbe complaint and admitted in tbe answer? Tbe court below answered in tbe negative. A careful consideration of tbe record leads us to tbe opposite conclusion.

Tbe defendant, in support of bis allegation that be was induced to sign tbe contract “by tbe fraud, duress and coercion of tbe plaintiffs,” avers in substance tbat be is uneducated and inexperienced, being a machine fixer in tbe mill; tbat be bad no access to tbe books and records of tbe corporation wbicb were at all times in tbe custody of plaintiffs; tbat plaintiffs knowingly and falsely, with intent to deceive, grossly misrepresented tbe value of tbe stock, of wbicb value be bad no knowledge; tbat be was deceived thereby; tbat each stockholder was paid annually a bonus equal to 20% of the face value of bis stock in addition to dividends and salaries; tbat plaintiffs asserted tbat if be did not sell, they, through their majority control, would discontinue bis bonus and deprive him of all future dividends, “pictured to tbe defendant tbe many injurious consequences tbat would result to him if be did not sell bis stock at once at tbe price offered”; tbat they continued to make threats about tbe methods they would use to prevent him from realizing any further income from bis said stock and “did ‘bulldoze’ tbe defendant and by threats of depriving, him of all future profits on bis stock, and by misrepresenting tbe true value of bis stock, did inveigle tbe defendant into signing said contract.”

Thus, on defendant’s allegations it would seem plaintiffs not only knowingly falsely represented tbe value of tbe stock to be much lower than its real value, but also, by virtue of their complete control of corporate affairs, placed defendant in tbe position where be was compelled to sell at their price or else suffer tbe loss of tbe income-producing quality of bis stock which, in turn, would destroy or materially reduce its market or sales value. It was not a case of take it or leave itj but a case of take it or lose it. ■ He was compelled to choose whether be would be cast against Scylla or engulfed in Oharybdis. So be alleges. He is entitled to bis day in court to seek to make good these allegations.

Tbe judgment below is

Reversed.