Bank of Johnston v. Jones

August 30, 1927. The opinion of the Court was delivered by This appeal is from an order of the Circuit Judge overruling a demurrer to the complaint. The action is one for damages for deceit, and has its basis in a certain contract which the plaintiff has pleaded as a part of its complaint.

The defendants demurred on the ground that the complaint does not state facts sufficient to constitute a cause of action, in that:

"(1) The complaint shows a valid contract was entered into for the sale of the land mentioned.

"(2) The complaint shows that the said contract was duly carried out, and that the plaintiff accepted the consideration and has not returned it.

"(3) That there are not facts alleged in the complaint which show any injury done the plaintiff by any fraudulent or willful representations of the defendants.

"(4) That the allegations of the complaint show that the plaintiff entered into a contract, and the same was duly carried out, and the plaintiff has received the benefits of the said contract which it now holds."

The appeal raises the same questions, and we shall dispose of them in order.

In our consideration of the matter it will be well to keep in mind the following legal principles: (1) That the demurrer admits as true allegations of fact in the complaint (Citizens' Sav. Bank of Timmonsville v. Lynch,124 S.C. 498; 117 S.E., 715); (2) that a complaint, although it alleges contradictory matters, is not demurrable if it states a good cause of action (Ross v. Charleston, M. S. Transportation Co., 42 S.C. 447; 20 S.E., 285); (3) that a complaint is not demurrable if it states facts which would entitle the plaintiff to either legal or equitable relief (Lancaster v. Southern Life Ins. Co., 89 S.C. 179;71 S.E., 864. Huffman v. Owings, 108 S.C. 420;95 S.E., 78).

While the Circuit Judge assigned no reasons for overruling the demurrer, we do not think that he rested his decision upon the ground first stated by the appellants. The respondent agrees with the appellants, and the complaint contemplates, that the contract entered into was a valid obligation and binding upon all the parties. But the validity of the contract alone cannot avail the appellants. The main and deciding question in the case appears to be, not whether the contract was valid and binding, but whether it was carried out according to its terms. Hence the first ground of error advanced by the appellants is clearly without merit.

The next ground of imputed error presents, under the peculiar facts disclosed by the complaint and the contract, a more serious question. Upon a reading of the complaint and the contract, does it appear, as contended by the appellants, that the contract was duly carried out?

Admitting the contract to be a valid one, the respondent alleges that the appellants failed to carry out its terms, in that, in providing a purchaser for the premises or a portion of same, they practiced a fraud upon the plaintiff; that, with intent to deceive and cheat the plaintiff out of its security, the appellants made a pretensive sale to one C.A. Perry, who was selected by them as a dummy in the transaction, paying him the sum of $250 in money for the fraudulent and deceitful service rendered by him in the sham and false and fictitious sale.

The appellants contend that the respondent received an amount of money and a mortgage of an acreage of land as security for the payment of the balance due it that constituted full compliance with the terms of the agreement. But we think, as contended by the respondent, that under the contract, the plaintiff was entitled to, in addition to what it would receive in money and security, a bona fide purchaser of the property in question to be furnished by the appellants. Any other kind of sale would be a breach of that good faith upon which the respondent had a right to rely.

It is reasonable to suppose that a purchaser, who puts up his own money to the amount of $6,000 and gives a mortgage on the property for the balance of $24,000 owing thereon, would make an honest effort to pay the balance, in order that he might not lose the $6,000 already invested. Such an incentive would be a valuable asset to the holder of the mortgage. The respondent was entitled to such an asset, and its absence, achieved, as alleged, through fraud and deceit, might result in injury to the respondent.

As to the contention of the appellants that no facts are alleged in the complaint which show any injury to the respondent by any fraudulent representation of the defendants, we may say that what we have already said in disposing of the second proposition applies here. As we have seen, the respondent was entitled to a bona fide purchaser — one who would assume in good faith the obligations imposed upon him by the transaction. According to the complaint, the appellants, by their course of action, represented to the respondent that they had made a bona fide sale of the land to a purchaser in good faith. This was a material representation and, if false, was a fraud on the respondent.

It is not to be doubted that if the appellants had furnished a bona fide purchaser who was acting in good faith, the respondent would not be heard to complain, although it might have afterwards turned out that the purchaser-mortgagor was unable to meet the obligations he assumed. But if the respondent had known that the purchaser, as alleged, was not acting in good faith, but was a "dummy" furnished by the appellants, it could not have been compelled to surrender its security by canceling the mortgage it held upon the entire tract of land. It could have, and doubtless would have refused to sanction or enter into any transaction affecting its interests, the parties to which were not acting in good faith.

The appellants further contend that as the respondent has failed to return or tender back the consideration and benefits moving to it under the contract but now holds and enjoys same, it cannot maintain this action. We have made a careful examination of the authorities and are satisfied that this is a case in which the respondent may elect to tender back the consideration and sue for rescission of the contract, or to retain the consideration, as it has done, and sue for damages sustained by reason of the fraud and deceit alleged to have been practiced upon it by the appellants.Whittle v. Jones, 79 S.C. 205; 60 S.E., 522.

While the truth of the allegations is a matter to be determined on the trial of the cause, for the purpose of a consideration of the demurrer, as herein stated, the demurrer admits as true allegations of fact in the complaint, and giving to the allegations of the complaint the liberal construction to which they are entitled on demurrer(Owens v. Atlantic Coast Lumber Corporation, 108 S.C. 258;94 S.E., 15), we are satisfied that a cause of action is stated.

Let the complaint, the contract, and the exceptions be reported.

The judgment of this Court is that the judgment of the Circuit Court be affirmed.

MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES COTHRAN and STABLER concur.

MR. JUSTICE BLEASE did not participate.