Jones v. Hester

132 S.E.2d 586 (1963) 260 N.C. 264

Eugene M. JONES
v.
Waverly M. HESTER.

No. 18.

Supreme Court of North Carolina.

October 9, 1963.

Robert N. Golding, W. Y. Wilkins, Jr., Tryon, for plaintiff-appellant.

McCown, Lavender & McFarland, by Wm. A. McFarland, Tryon, and Hamrick & Jones, by Fred D. Hamrick, Jr., Rutherfordton, for defendant-appellee.

HIGGINS, Justice.

The plaintiff relied on the defendant's adverse examination to fill in the low places in his case. We have quoted in part and summarized in part admissions taken from the adverse examination, most of which were excluded by the court. However, the admissions in the pleadings, the evidence introduced, and that which was offered and excluded tended to show the following: Prior to February, 1958, the plaintiff and Matt O'Shields were comanagers of Ballenger's, Inc. Each owned $15,000 stock in the corporation. O'Shields was released as comanager in 1958. The plaintiff acted as sole manager thereafter. The defendant was president of the corporation.

On April 15, 1960, the defendant issued a call for a stockholders meeting "to present evidence of dishonesty on the part of some former employees of Ballenger's, Inc., and to call a $5,000 surety bond on Matt O'Shields and Eugene Jones." On the adverse examination the defendant was asked whether between April 15, 1960, the date of the notice calling the meeting, and April 19, 1960, the date of the meeting, he did not (on behalf of Mountain Land Company in which he was interested) purchase the Matt O'Shields stock for $5,000 with the understanding "it was to be a closed transaction and there would be no further demands on Matt O'Shields * * *." Answer: "That is the record that speaks for itself."

O'Shields and Jones were comanagers. Both were covered by a faithful performance bond. The conduct of both was to be investigated in the stockholders meeting. The defendant purchased the O'Shields stock for one-third of its par value between the call and the meeting and O'Shields was released from further responsibility. On the day of the stockholders meeting the defendant wrote the plaintiff that he, the defendant, had conferred with the manager and adjustor of the surety company who, in turn, would confer with plaintiff and his attorney "regarding a settlement of the bond held by Ballenger's, Inc., guaranteeing your honesty and integrity." This evidence which appears to have been excluded may or may not be sufficient to permit the inference the president of Ballenger's, Inc., meant to charge O'Shields and plaintiff with dishonesty and a breach of their bond in order to influence them to sell their Ballenger's stock (not to the Ballenger corporation—but to another company in which the defendant was interested) for one-third of its par value.

In view of the tie-in between O'Shields and the plaintiff, the latter was entitled to place before the jury the defendant's admission that he arranged the purchase of the O'Shields stock and released O'Shields from further responsibility to Ballenger's. The rule governing the admissibility of such evidence was stated by Stacy, C. J., in Farmers Federation v. Morris, 223 N.C. 467, 27 S.E.2d 80: "``It is not required that the evidence bear directly on the question in issue, and it is competent and relevant if it is one of the circumstances surrounding the parties and necessary to be known to properly understand their conduct or motives, or to weigh the reasonableness of their contentions' ". Citing Bank of Union v. Stack, 179 N.C. 514, 103 S.E. 6.

"An extra-judicial act or declaration may be admitted into evidence where it tends to explain or show the character, motive, purpose, or intent of the act or transaction in dispute." People v. Frangadakis, 184 Cal. App. 2d 540, 7 Cal. Rptr. 776.

The defendant's admissions with respect to the O'Shields transaction may or may not aid the jury in determining whether in making the charge of dishonesty at the stockholders meeting, the defendant acted in good faith. The question is one of fact to be determined by the jury and not one of law to be decided by the court.

The president of a business corporation is charged with the duty of safeguarding the legitimate business interests of his company. Of course, it is his duty to make inquiry and to bring to the attention of the stockholders any evidence of dishonesty on the part of any employee, past or present—not excluding stockholders. A call of a stockholders meeting to present evidence of dishonesty places the president in a position of qualified privilege, both in calling the meeting and in presenting the evidence. His position and the occasion were sufficient to protect him from liability if his charges were made in good faith. Hartsfield v. Harvey C. Hines, Co., 200 N.C. 356, 157 S.E. 16.

If a publication is libelous or actionable per se the author may escape civil liability by pleading and showing privilege, either absolute or qualified. Ponder v. Cobb, 257 N.C. 281, 126 S.E.2d 67. In order to defeat the defense of qualified privilege, the plaintiff may plead and prove malice, or that the publication was prompted by some improper or ulterior motive and not made in good faith. Harrison v. Garrett, 132 N.C. 172, 43 S.E. 594; Gattis v. Kilgo, 140 N.C. 106, 52 S.E. 249; Riley v. Stone, 174 N.C. 588, 94 S.E. 434; Yancey v. Gillespie, 242 N.C. 227, 87 S.E.2d 210; Chambers v. Leiser, 43 Wash. 285, 86 P. 627.

The evidence admitted, together with that which was offered and improperly excluded, raised issues of fact which the court was not permitted to decide as a matter of law. Decision must be made in the manner provided for the settlement of disputed issues of fact—by submission to the jury.

The judgment of involuntary nonsuit entered in the court below is

Reversed.