Burns v. Gulf Oil Corporation

98 S.E.2d 339 (1957) 246 N.C. 266

R. L. BURNS
v.
GULF OIL CORPORATION, H. Q. Draughn, R. I. Hicks, E. L. Martin and Charlie Johnston.

No. 525.

Supreme Court of North Carolina.

May 22, 1957.

Pittman & Staton, Lowry M. Betts, Sanford, Douglass & McMillan, Raleigh, P. H. Wilson and H. F. Seawell, Jr., Carthage, for plaintiff, appellee.

Gavin, Jackson & Gavin, Sanford, Basil M. Watkins, Durham, and Smith Leach, Anderson & Dorsett, Raleigh, for defendant Gulf Oil Corporation, appellant.

BOBBITT, Justice.

The record does not disclose the ground on which plaintiff's demurrer ore tenus was interposed or sustained. So far as appears, it was directed to Gulf's three causes of action, collectively. The question debated here, and presumably in the court below, is whether Gulf's causes of action are permissible counterclaims under G.S. § 1-137. This opinion deals solely with that question.

Under G.S. § 1-137, "A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action," in favor of a defendant and against a plaintiff "between whom a several judgment might be had in the action," is a permissible counterclaim.

In determining whether Gulf's alleged counterclaims are permissible, we must accept as true the facts alleged therein.

Whether Gulf wrongfully terminated the contract of May 1, 1947, as an overt act in furtherance of the alleged conspiracy, as asserted by plaintiff, or whether plaintiff terminated said contract and also his lease of Gulf's bulk plant in furtherance of a scheme to discontinue his relationship with Gulf and to engage in business as a distributor for another oil company, as asserted by Gulf, this is clear: Determination of the respective rights and obligations of plaintiff and Gulf (1) with reference to the termination of their contract of May 1, 1947, (2) with reference to their relationships with dealers in and customers for Gulf products, and (3) with reference to installations made to facilitate the handling of Gulf's products, while their contract was in effect and also upon termination thereof, lies at the center of this controversy.

While plaintiff's action is in tort, the respective rights and obligations of plaintiff and Gulf arise from and are determined by the contractual relationship subsisting between them. Pinnix v. Toomey, 242 N.C. 358, 87 S.E.2d 893. The defamatory statements and the acts of interference with plaintiff's business, dealers and employees, alleged by plaintiff, and the wrongful acts of plaintiff alleged in Gulf's counterclaims, all must be considered in relation to the respective rights and obligations of the parties under said contract of May 1, 1947.

As stated by Stacy, J. (later C. J.), in J. A. Construction Co. v. Hamlet Ice Co., 190 N.C. 580, 130 S.E. 165, 166: "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." 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. 111, 63 S.E. 680. The cases cited present factual situations relating to a single contract, each party alleging a breach thereof by the other. Moreover, they relate to pleas in abatement and support the view that if Gulf had not alleged its said counterclaims herein it would be precluded from doing so in an independent action. Here, we are concerned only with whether Gulf's alleged causes of action are permissible counterclaims.

If it be conceded that certain of the alleged defamatory statements would constitute a cause of action, apart from the contractual relationship between plaintiff and Gulf, the answer is that in such case plaintiff has compounded in his complaint, although not separately stated, at least two alleged causes of action. Heath v. Kirkman, 240 N.C. 303, 82 S.E.2d 104. It appears plainly that, independent of alleged defamatory statements, plaintiff has included in his complaint an alleged cause of action for wrongful interference with and damage to his business by defendants' alleged violations of plaintiff's rights under his contract with Gulf. The intermixture of these causes of action makes it somewhat more difficult to deal with the questions presented. But if Gulf's causes of action are permissible counterclaims to any cause of action alleged by plaintiff, it makes no difference that plaintiff did not see fit to allege such cause of action separately. G.S. § 1-138.

The conclusion reached thus far is that, if plaintiff's action were against Gulf alone for the alleged wrongful conduct of its agents, Gulf's counterclaims are permissible. There remains for consideration the effect, if any, of plaintiff's allegations as to conspiracy and his joinder of the individual defendants.

Whether the allegations of the complaint are sufficient to support a recovery on account of the alleged wrongful acts of Gulf if plaintiff should fail to establish the alleged conspiracy, is a question we need not decide. See Manley v. Greensboro News Co., 241 N.C. 455, 85 S.E.2d 672. Whether restricted thereto, plaintiff does allege conspiracy and overt acts in furtherance thereof.

"Accurately speaking, there is no such thing as a civil action for conspiracy. The action is for damages caused by acts committed pursuant to a formed conspiracy, rather than by the conspiracy itself; and unless something is actually done by one or more of the conspirators which results in damage, no civil action lies against anyone. The gist of the civil action for conspiracy is the act or acts committed in pursuance thereof—the damage—not the conspiracy or the combination. The combination may be of no consequence except as bearing upon rules of evidence or the persons liable." 11 Am.Jur. 577, Conspiracy sec. 45. To create civil liability for conspiracy there must have been an overt act committed by one or more of the conspirators pursuant to the scheme and in furtherance of the objective. 15 C.J.S. Conspiracy § 5, p. 1000. These principles have been recognized and applied by this Court. Muse v. Morrison, 234 N.C. 195, 66 S.E.2d 783; Holt v. Holt, 232 N.C. 497, 61 S.E.2d 448.

"It would seem that, as to a conspirator who committed no overt act resulting in damage, the basis of his liability for the conduct of his co-conspirators bears close resemblance to the basis of liability of a principal under the doctrine of respondeat superior for the torts of his agent." Reid v. Holden, 242 N.C. 408, 415, 88 S.E.2d 125, 130.

Thus, a plaintiff's right to recover must be based on overt acts. Whether such overt acts, if established, were committed in furtherance of an alleged conspiracy entered into between two or more persons determines from whom the plaintiff may recover, i. e., the identity of the parties who are legally liable for damages resulting from such overt acts. So considered, the alleged overt acts, rather than the existence or nonexistence of the conspiracy, constitutes the foundation of plaintiff's alleged cause of action.

"All conspirators may be joined as parties defendant in an action for the damages caused by their wrongful act, although it is not necessary that all be joined; an action may be maintained against only one." 11 Am.Jur., Conspiracy sec. 54. The liability of Gulf is to be determined on the same basis as if it were the sole defendant, either originally or by reason of voluntary nonsuit as to the individual defendants.

Moreover, the liability of conspirators is joint and several. Muse v. Morrison, supra; 11 Am.Jur., Conspiracy sec. 45; 15 C.J.S. Conspiracy § 18. Indeed, plaintiff's prayer is for "judgment against the defendants with joint and several liability" in the amounts set forth above.

This question arises: Where the action is joint in form, is it permissible for one of several defendants to allege a counterclaim solely in its favor? The answer is "Yes," if the liability of such defendant, in respect of plaintiff's claim, is several, or joint and several.

Decisions in other jurisdictions are collected in two annotations: 10 A.L.R. 1252; 81 A.L.R. 781.

In 80 C.J.S. Set-Off and Counterclaim § 51 f, this statement appears: "* * * as a general rule, where action is brought against two or more defendants on a joint and several demand, or on a several demand, a set-off or counterclaim consisting of a demand in favor of one of them against plaintiff may, if otherwise without objection, be interposed; and it is immaterial in such case that the action is joint in form, * * *."

In 47 Am.Jur., Setoff and Counterclaim sec. 56, this statement appears: "In many jurisdictions, the availability as a setoff or counterclaim of a demand against the plaintiff, in an action at law, in favor of less than the whole number of defendants depends on whether the defendant or defendants having such claim are severally liable to the plaintiff, or are liable jointly with the other defendant or defendants to the suit. If a several judgment may be entered against such defendant or defendants, then, in these jurisdictions, a claim in his or their favor against the plaintiff or plaintiffs is available as a setoff or counterclaim. This rule has been made statutory in a number of states. A common form of statute provides that a counterclaim must be one existing in favor of a defendant, and against a plaintiff, between whom a several judgment may be had in the action." It is noted that G.S. § 1-137 so provides.

If the counterclaim is otherwise permissible, and the liability of the defendant who asserts it is several, or joint and several, the mere form of plaintiff's action should not and does not operate to deprive such defendant of the statutory right to interpose such counterclaim. We approve the rule stated in the foregoing quotations from Corpus Juris Secundum and American Jurisprudence. It appears that this rule was applied in Shell v. Aiken, 155 N.C. 212, 71 S.E. 230, where, in plaintiff's action against two defendants, jointly and severally liable on a promissory note, a counterclaim in favor of one of the defendants was upheld.

If Gulf is liable as a conspirator for wrongful acts in furtherance of the alleged conspiracy, its liability is several as well as joint, that is, Gulf is liable to plaintiff for the full amount of plaintiff's recovery. If Gulf prevails on all or any of its counterclaims, a several judgment as between plaintiff and Gulf, may be entered, adjudicating their rights and liabilities inter se. G.S. § 1-222.

For the reasons stated, we conclude that the causes of action alleged by Gulf are permissible counterclaims; and that the judgment from which this appeal was taken must be reversed.

This disposition of the appeal makes unnecessary a consideration of appellant's contentions: (1) that plaintiff, having replied thereto, could not thereafter challenge by demurrer ore tenus Gulf's right to allege said causes of action as counterclaims; and (2) that Judge Craven had no jurisdiction, by reason of a prior ruling by Judge Seawell on plaintiff's motion to strike, to pass upon the question presented by plaintiff's demurrer ore tenus.

Reversed.