Hill v. HILL SPINNING COMPANY , 244 N.C. 554 ( 1956 )

94 S.E.2d 677 (1956) 244 N.C. 554

N. B. HILL (Original Party Plaintiff), and Lydia Worthington Hill and Brant Waters, Co-Executors of the Estate of N. B. Hill, deceased (Additional Parties Plaintiff),
v.
HILL SPINNING COMPANY, Incorporated.

No. 172.

Supreme Court of North Carolina.

October 10, 1956.

R. M. Holland, Roseboro, and Butler & Butler, Clinton, for plaintiffs, appellees.

Jones, Reed & Griffin, Kinston, for defendant, appellant.

BOBBITT, Justice.

We need not consider whether it was permissible for defendant to allege as a counterclaim or defense the same facts it had alleged in its said prior action. Suffice it to say, defendant has not alleged such facts.

In a complaint, if plaintiff undertakes to allege two or more separately stated causes of action, each must be complete within itself. It is not permissible to incorporate by reference allegations made in another separately stated cause of action. Heath v. Kirkman, 240 N.C. 303, 82 S.E.2d 104, and cases cited. A fortiori, it is not permissible for a plaintiff to incorporate by reference allegations made by him in a pleading filed in a separate and independent action. This rule applies equally when a defendant attempts to allege a cause of action as a counterclaim.

Paragraph 3 of defendant's further answer and defense rests wholly on the allegations in its pleadings in said prior action, which defendant attempted to incorporate by reference. When we exclude these from consideration, said paragraph 3 does not state facts sufficient to constitute a cause of action. Hence, the orders sustaining plaintiffs' demurrer and motion to strike were proper.

Even so, analysis of the pleadings in said prior action must be made to determine the validity of defendant's plea in abatement. In this connection, it is noted that the record on this appeal contains only the pleadings filed by the plaintiff (corporation) in said prior action. The reply affords no assistance since the answer to which it relates does not appear.

In its complaint in said prior action, the plaintiff alleged generally that Hill, as president and treasurer of the corporation from 1940 until the action was commenced, had full charge of the corporation's finances and operations; that he withdrew and fraudulently misapplied to his own use and to the use of his codefendants funds of the corporation in an amount in excess of $100,000, all with the knowledge, acquiescence and approval of his codefendants; and that the funds so misappropriated were used in acquiring various properties, title to which was taken in the name of the defendants or one or more of them.

When the plaintiff filed its bill of particulars it thereby confined its case to the items specified therein. Beck v. Lexington Coca-Cola Bottling Co., 214 N.C. 566, 199 S.E. 924. The bill of particulars, omitting details, specified these alleged withdrawals and misappropriations of the corporation's funds, to wit;

1. During 1946-1954, inclusive, Hill traded in cotton futures in the name of the corporation, using the corporation's credit and funds, realizing a net gain from such trading of $6,584.63. However, Hill caused entries to be made on the corporation's books reflecting a net loss of $31,523.86. The total of these two items, to wit, $38,108.49, was "fraudulently withdrawn, misapplied and misappropriated by the said defendant (Hill), and through him by his codefendants * * *."

2. During 1947-1954, inclusive, Hill traded in cotton futures "for his own personal use and benefit, and for the use and benefit of his codefendants and others than the plaintiffs," using the funds and credit of the corporation, and in so doing lost $19-883.91. However, Hill caused book entries to be made showing this to be the corporation's loss.

And the plaintiff in said prior action, in its bill of particulars, modified its prayer for relief, alleging that the defendants were jointly and severally liable to it in the amount of $57,992.50.

The rules applicable when considering a plea in abatement on the ground that "there is another action pending between the same parties for the same cause", G.S. § 1-127(3), are stated, with full citation of authority, by Ervin, J., in McDowell v. Blythe Brothers Co., 236, N.C. 396, 72 S.E.2d 860, and by Winborne, J. (now C. J.), in Dwiggins v. Parkway Bus Co., 230 N.C. 234, 52 S.E.2d 892.

Defendant's plea in abatement is good only if (1) the plaintiffs herein could obtain the same relief by counterclaim in said prior action, and (2) a judgment in favor of the plaintiff in said prior action (defendant herein) would operate as a bar to plaintiffs' prosecution of this action. Cameron v. Cameron, 235 N.C. 82, 86, 68 S.E.2d 796, 31 A.L.R. 2d 436, and cases cited.

The said prior action was in tort for alleged conversion of the corporation's funds. Whether Hill's claim for salary was permissible as a counterclaim therein is governed by the provisions of G.S. § 1-137(1). Garrett v. Rose, 236 N.C. 299, 305, 72 S.E.2d 843. The words and phrases used in G.S. § 1-137(1) are defined by Barnhill, J. (later C. J.), in Hancammon v. Carr, 229 N.C. 52, 47 S.E.2d 614. In Bitting v. Thaxton, 72 N.C. 541, under a somewhat similar factual situation, such a counterclaim was held to be permissible. We need not decide whether the cited case would control decision under the facts here. Compare: Commercial Finance Co. v. Holder, 235 N.C. 96, 68 S.E.2d 794. We may concede, for present purposes, that Hill's claim for back salary was permissible as a counterclaim in said prior action.

Be that as it may, we have reached the conclusion that, under applicable decisions of this Court, the said prior action and this action are not for the same cause of action within the meaning of G.S. § 1-127(3). See, also, G.S. § 1-133 and McDowell v. Blythe Brothers Co., supra. The basic reason is that a defendant, having a cause of action against the plaintiff, even if permissible as a counterclaim, may elect to plead it as such or institute a separate action thereon unless the issues raised in the prior action, if answered in favor of the plaintiff therein, would preclude and bar the prosecution of the second action. Cameron v. Cameron, supra, and cases cited; Union Trust Co. v. McKinne, 179 N.C. 328, 102 S.E. 385; Francis v. Edwards, 77 N.C. 271; Mcintosh, N.C. P. & P, sec. 468.

In Allen v. Salley, 179 N.C. 147, 101 S.E. 545, and similar automobile collision cases, pleas in abatement were allowed. Dwiggins v. Parkway Bus Co., supra; Johnson v. Smith, 215 N.C. 322, 1 S.E.2d 834. Brown, J., in Union Trust Co. v. McKinne, supra, took occasion to emphasize that in Allen v. Salley, supra, the sole purpose of the litigation was to determine whose negligence caused the collision. Necessarily the issues in the first action would determine the whole controversy between the parties.

In J. A. Jones Construction Co. v. Hamlet Ice Co., 190 N.C. 580, 130 S.E. 165, 166, the construction company's action to recover the balance alleged to be due under a building contract was abated on account of the pendency of a prior action wherein the ice company sued to recover damages for an alleged breach of the identical building contract. The basis of decision is indicated by this excerpt from the opinion of Stacy, C. J.: "It will be observed that the parties bottom their respective causes of action on the same contract; each alleging a breach by the other. The two causes of action, therefore, arise out of the same subject-matter, and a recovery by one would necessarily be a bar or offset, pro tanto at least, to a recovery by the other."

In accord with J. A. Jones Construction Co. v. Hamlet Ice Co, supra; Fletcher Lumber Co. v. Wilson, 222 N.C. 87, 21 S.E.2d 893; Garrett v. Kendrick, 201 N.C. 388, 160 S.E. 349; Savage v. McGlawhorn, 199 N.C. 427, 154 S.E. 673; Bell v. Mutual Machine Co, 150 N.C. Ill, 63 S.E. 680. These cases present factual situations relating to a single contract, each party alleging a breach thereof by the other.

In short, consideration of decided cases in which a plea in abatement has been allowed discloses the fact that answers to the issues in the prior action perforce would determine the whole controversy between the parties. Cameron v. Cameron, supra.

Applying these legal principles to the present case, it is noted that the complaint and bill of particulars in said prior action do not relate to Hill's salary. The allegations thereof negative any idea that any of the alleged withdrawals were or purported to be salary payments. The issues raised concern only the alleged fraudulent withdrawal and misapplication of the corporation's funds. Nor do plaintiffs herein contend that any part of the funds alleged to have been fraudulently withdrawn and misapplied are funds to which Hill was entitled as salary. The present action is to recover salary allegedly due but not paid.

The issues in said prior action relate directly and solely to the specific matters alleged in the bill of particulars. If answered in favor of the plaintiff (corporation), the issues and the judgment predicated thereon would not determine whether the corporation is indebted to Hill on account of unpaid salary. Therefore, it would not preclude and bar the prosecution of this action. Whether the corporation is indebted to Hill on account of unpaid salary is a separate and distinct matter, the sole issue arising on the pleadings in the present action. The cause of action in the one case is different from the cause of action in the other.

Taking this view, it is unnecessary to consider what effect, if any, should be given the fact that Mrs. Lydia Hill and N. B. Waters, defendants in said prior action, are not parties to this action.

It is noteworthy that both actions are pending in the Superior Court of Sampson County. The prior action, instituted by the corporation, appears first on the docket; and presumably such action will be tried first. As a practical matter, the situation is quite different from that ordinarily presented in connection with a plea in abatement. Where the second action is instituted in a county different from that in which the first action is pending, each party is disposed to compete with the other to determine which case will be first reached for trial. The defendant herein is well ahead. No reason is apparent why it should not proceed with the trial of said prior action.

For reasons stated, the three orders signed and entered by the court below are affirmed.

Affirmed.

JOHNSON, J., not sitting.