Erickson v. Starling

64 S.E.2d 832 (1951) 233 N.C. 539

ERICKSON et al.
v.
STARLING et al.

No. 453.

Supreme Court of North Carolina.

May 2, 1951.

Lassiter, Leager & Walker, Raleigh, for plaintiffs, appellees.

Smith, Leach & Anderson and James K. Dorsett, Jr., Raleigh, for defendants, appellants.

STACY, Chief Justice.

While the complaint in this action contains 80 separate allegations and covers 22 pages of the record, in its final analysis the case comes to a very narrow compass. Is there a misjoinder of parties and causes of action? The trial court thought not, and we approve.

It is readily conceded that a misjoinder of parties and causes of action in the same complaint is demurrable, and the court is without authority, in such case, to order a severance of the causes of action for trial under the provisions of G. S. § 1-132. Teague v. Silver City Oil Co., 232 N.C. 65, 59 S.E.2d 2; Rose v. Fremont Warehouse & Improvement Co., 182 N.C. 107, 108 S.E. 389.

All the plaintiffs are trying to do here, however, is to follow the 400 shares of stock placed in trust by their father for their use and benefit. It constitutes the controlling interest in the W. H. King Drug Company.

The trustees are charged with its use and management. Undoubtedly it reaches into the wholly-owned subsidiary Peabody Drug Company, and under the allegations of the complaint it would seem that the Carolina Surgical Supply Company is a proper, if not a necessary, party to the proceeding. Farmers Loan & Trust Co. v. Pierson, 130 Misc. 110, 222 N.Y.S. 532; Rossi v. Davis, 345 Mo. 362, 133 S.W.2d 363, 125 A.L.R. 1111. There is much more in the complaint, but this is the heart of the matter.

The case is not unlike Jarrett v. Green, 230 N.C. 104, 52 S.E.2d 223, 225, where plaintiff's counsel aptly said: "We are entitled to pursue the hunt so long as we can track the fox; and not until we lose the trail are we obliged to abandon the chase, call our dogs and go home".

Trustees are not permitted to profit individually from the trust estate to the detriment of the cestuis. This is the gist of the allegations in the instant case. Having been given the controlling interest in the W. H. King Drug Company in trust for the benefit of the plaintiffs, it was and is the duty of the trustees to use such control of the parent company and also of the companies controlled by it, not for their personal profit, but for the use and benefit of the plaintiffs. The complaint seeks to bring in the trustees and their confederates, corporate and individual, with a view to an accounting from all who have participated in the derelictions and maladministration of the trustees or profited therefrom. This would seem to result in no misjoinder of parties and causes of action in excess of the permissible provisions of G.S. § 1-123 or in opposition to the pertinent decisions on the subject. Leach v. Page, 211 N.C. 622, 191 S.E. 349; Daniels v. Fowler, 120 N.C. 14, 26 S.E. 635; Virginia-Carolina Chemical Co. v. Floyd, 158 N.C. 455, 74 S.E. 465; Bundy v. Marsh, 205 N.C. 768, 172 S.E. 353. Trustees may not cover up their machinations by the use of corporate forms or camouflage of any kind. The arm of equity is neither short nor palsied when it comes to dealing with fraud; nor is judicial process or privilege intended to be used as a shield against ferreting it out or to stay the day of reckoning and judgment, but rather to be employed, as contemplated, in a single action for investigation of the whole scheme and the unravelling of its ramifications. Equity regards substance not form, and corporate identity offers no bar to its pursuit of the "plumbline" of right dealing and fair accounting. Amos 7:8; Mills v. Mutual B. & L. Ass'n, 216 N.C. 664, 6 S.E.2d 549; Unemployment Compensation Comm. v. City Ice & Coal Co., 216 N.C. 6, 3 S.E.2d 290; Fisher et al. v. Southern Loan & Trust Co., 138 N.C. 224, 50 S.E. 659.

Up to now, the case rests only in allegation. The defendants have not yet answered. They may have a different story to tell. The question presently presented is the propriety of joining all the matters set out in a single complaint. The trustees are charged with maladministration of the trust estate, and the plaintiffs are seeking to follow the estate and to hold the trustees responsible and those who have knowingly participated in and profited from such maladministration, which would seem to be their right. Branch Banking & Trust Co., v. Peirce, 195 N.C. 717, 143 S.E. 524.

In Young v. Young, 81 N.C. 91, 92, it was held (as stated in the first headnote): "Where a general right is claimed arising out of a series of transactions tending to one end, the plaintiff may join several causes of action against defendants who have distinct and separate interests, in order to a conclusion of the whole matter in one suit." And it has been held that in such case the share of each, in causing the total loss, may be separately measured and assessed in one action. Long v. Swindell, 77 N.C. 176.

The rulings on the demurrers will be upheld.

Affirmed.