Bank of Enoree v. Yarborough

July 5, 1922. The opinion of the Court was delivered by Four actions were commenced against the defendants, two by the Bank of Enoree and two by Woodruff Oil Fertilizer Company, upon certain notes. They were tried together on Circuit, and the appeals were heard together in this Court. The same questions arise in all of the cases, and they will be discussed and determined in connection with the first cause of action alleged in the complaint of the Bank of Enoree against John Yarborough and others, the decision being determinative of the issues in all of the cases.

The appeal is from an order of Circuit Judge Sease, at Chambers, rendering judgment in favor of the plaintiff, upon the pleadings.

In the cause of action referred to it is alleged:

(1) The incorporation of the plaintiff.

(2) A description of the note with the usual particularity as to amount, date, maturity, interest rate, attorney's fees, demand, and ownership.

(3) Indorsement by the defendants other than John Yarborough, the principal debtor.

In the answer the defendants allege:

(1) A denial of each and every allegation of the complaint not thereinafter admitted.

(2) Upon information and belief specifically denied the corporation of the plaintiff as alleged in Paragraph 1 of the complaint and demands strict proof thereof.

(3) A denial that 10 per cent. is a reasonable fee for the collection of the note.

(4) An admission of the execution of certain notes, but a declaration of ignorance as to the amounts or maturities thereof.

The plaintiff then, after due notice, moved before Judge Sease at Chambers: (1) For an order striking out the answer as sham and intended only for delay; (2) for judgment, upon the verified complaint, the note sued upon, and the answer.

Upon the hearing, the Circuit Judge passed an order, holding that the answer was interposed merely for delay and was sham, but that it was unnecessary to strike it out as such as he preferred to base his order upon the motion for judgment. He therefore held that the answer raised no issue of fact and rendered judgment under the Act of 1921, page 281, in favor of the plaintiff, fixing the attorney's fees for all of the cases, involving $16,211.93, at $665.00.

From this order the defendants have appealed and contend that the answer raises issues of fact involving:

(1) The corporate capacity of the plaintiff.

(2) The amount, maturity, date, interest rate, attorney's fees, demand and ownership of the note.

(3) The reasonableness of the attorney's fee to be allowed.

As to the first point, that the answer raised an issue of fact as to the corporate capacity of the plaintiff:

It has been established by an unbroken line of decisions in this State, that a general denial in an answer does not put in issue the fact of the incorporation of the plaintiff alleged in the complaint. CommercialCo. v. Turner, 8 S.C. 110; Steamship Co. v. Rodgers,21 S.C. 27; Palmetto Co. v. Risley, 25 S.C. 309; Rembertv. R. Co., 31 S.C. 309, 9 S.E., 968; Walpole v. CityCouncil, 32 S.C. 547, 11 S.E., 391; Land Co. v. Williams,35 S.C. 367; 14 S.E., 821; Hankinson v. R. Co.,41 S.C. 1; 19 S.E., 206; Montgomery v. R. Co., 73 S.C. 503;53 S.E., 987.

It is equally well established that an allegation in the answer that the defendant has not knowledge or information sufficient to form a belief as to the corporate capacity of the plaintiff, does not put that fact in issue. American Co. v. Hill, 27 S.C. 165; 3 S.E., 82;Ober v. Blalock, 40 S.C. 31; 18 S.E., 264; Seigler v. R.Co., 85 S.C. 345; 67 S.E., 296; Gin Co. v. Counts, 98 S.C. 136;82 S.E., 391.

It is apparent, however, that there is a marked distinction between an allegation of the character just described and an allegation that upon information and belief the defendant denies a certain alleged fact. The latter bears no analogy to the former; in fact, it is the reverse of it, in that it alleges both information and belief, which the former denies.

The decisions quoted are not therefore conclusive of the question whether or not a specific denial of the corporate capacity of the plaintiff, made upon information and belief, stating no grounds of attack or nature of the information alleged to have been received which created the alleged belief, puts that corporate capacity in issue.

We recognize the general rule of pleading that an express denial of an allegation in the complaint is not the less specific because made upon information and belief; yet in an attack upon the legal capacity of the plaintiff to maintain his suit, in the interest of fair dealing and frank and honest pleading, something more is required than a bold denial, specific though it may technically be considered; and this is the spirit of the case hereinbefore cited.

In Blackwell v. Mortgage Co., 65 S.C. 105;43 S.E., 395, it is declared:

"The defendant cannot take advantage of this objection under a general denial, but demurrer was the proper remedy when the objection appears upon the face of the complaint; and when it does not so appear, the appropriate remedy is to set up the objection as a defense in the answer. In either case, the defendant is required to specify distinctly the grounds of the objection."

In 14 A.C.J. 829, it is said:

"Whether the plaintiff's corporate existence is questioned by the plea in abatement, by plea in bar, or by answer, the matter should be set out with precision and should be direct and positive."

A defendant honestly attacking the corporate existence of the plaintiff, upon facts within his knowledge or upon information leading to the conviction that such attack is justifiable, has no right to complain that he be required to fight in the open, and not be allowed to raise an issue which will accomplish his purpose of delay and be abandoned when the day of judgment may no longer be postponed.

Another consideration leads us to this conclusion: The legal existence of a corporation is a matter of public record; there is no justification for the grounds of attack to be alleged "upon information and belief"; the fact that they are so alleged casts a serious doubt upon the sincerity of the attack.

In Nelson v. Twin Falls, 14 Idaho, 5; 93 Pac., 789, it is held that the Code does not authorize a denial on information and belief of an allegation that plaintiff corporation has complied with the law in filing its articles of incorporation, etc., since such fact may be ascertained from the public records.

In First National Bank v. Walker, 27 Idaho, 204;148 Pac., 46, it is held:

"The corporate existence of a national bank is a matter of public record, and, under a long line of decisions from this and other Courts, a denial on information and belief of matters of public record is not a sufficient denial, under our statute."

In Wilson Co. v. Trainor (27 Cal. App. 43),148 Pac., 954, it is held, quoting from the syllabus:

"The plaintiff's allegation of its corporate capacity and existence could not be denied upon information and belief, because it might have failed to pay its license tax, as the statutory acts to be performed before its franchise would be forfeited were matters of record, and the existence of a fact ascertainable from an inspection of a public record cannot be put in issue by a denial solely upon information and belief."

We are not unmindful of the fact that our conclusion upon this subject is not in accord with the case of Bank v.Eldred, 143 U.S. 293; 12 Sup. Ct., 450; 36 L.Ed., 162.

As to the second point, that the answer puts in issue the descriptive details of the note: The cases ofBank of Johnson v. Fripp, 101 S.C. 185;85 S.E., 1070, and Guaranty Co. v. Kibler, 105 S.C. 513;90 S.E., 159, are conclusive of this issue against the contention of the defendants.

As to the third point, that the answer puts in issue the reasonableness of the allowance of attorney's fees: The note provided for 10 per cent. attorney's fees. In the case of Coley v. Coley, 94 S.C. 387; 77 S.E., 49, this Court held that the stipulated fee would be allowed unless it appeared to the Court that it would be extortionate. Surely the defendants have no ground of complaint in the allowance of $665.00 for all four cases which involve over $16,000.00.

The judgment of this Court is that the judgment of the Circuit Court in each of the four cases be affirmed.

July 27, 1922.

ON PETITION FOR REHEARING