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SUNDY v. ALLGOOD.
36873.
Action on note. Before Judge Stephens. Laurens Superior Court. July 5, 1957.
GARDNER, P.
The court did not err in any of its rulings.
James L. Sundy brought suit against J. L. Allgood to collect $7,000 plus interest and attorney's fees allegedly due on a promissory note, a copy of which was attached.
Paragraph 3 alleges that the note is past due, payment refused, and payment was demanded after the same became due. Paragraph 4 alleges that 10 days' notice of intention to collect attorney's fees was given, a copy of such notice being attached to and made a part of the petition.
The defendant answered by admitting paragraph 1 of the petition. In paragraph 2 of the answer the defendant denied all other allegations of the petition, specifically paragraphs 2, 3, and 4 thereof and further answered as follows:
"Further answering said petition, J. L. Allgood, the defendant, shows to the court that the referenced note was procured from him by plaintiff through fraud and misrepresentation of material facts, which fraud and misrepresentation on the part of James L. Sundy was deliberate and intentional for the purpose of procuring said note and which fraud and misrepresentation misled defendant, J. L. Allgood, as they were intended by James L. Sundy as J. L. Allgood had no knowledge of the true material facts, those facts having been within the peculiar knowledge of James L. Sundy, and that the fraudulent misrepresentations of James L. Sundy were relied upon by defendant in giving said note. The detailed nature of this fraud and intentional misrepresentation of material facts by James L. Sundy in procuring said note from defendant is fully and specifically indicated by the facts set forth hereinafter. For the reason of this fraud and material misrepresentation of material facts in procuring said note, J. L. Allgood shows that said note is void and should be so declared and for the same reason defendant shows that he is not obligated to plaintiff.
"Further answering said petition, J. L. Allgood, the defendant, shows to the court that there was, is and has been a complete failure and lack of consideration for said note as more fully and specifically shown by the facts hereinafter shown for which reason the said note is and should be declared void and for which reason the defendant is in no way obligated to plaintiff."
The defendant further answered by way of a cross-action against the plaintiff, showing the facts and manner of the fraud, misrepresentations of material facts and failure of consideration and lack of consideration, to wit:
Paragraph 1 alleges that the plaintiff and the defendant were formerly owners together and at times with others, of a Georgia corporation known as Glynn Isles, Inc., located in Glynn County, Brunswick, Georgia. Paragraph 2 alleges that A. E. Reese and Mrs. A. E. Reese were also at one time part owners of the corporation but that they sold their interest therein to the plaintiff and the defendant in May, 1954. Paragraph 3 alleges that as an officer of the corporation the plaintiff kept and maintained the records and books of the corporation. Paragraph 4 of the answer alleges that on August 30, 1954, the plaintiff and the defendant entered into a memorandum agreement for the purchase by the defendant of all interest which the plaintiff had in the corporation, which agreement recited an approximate purchase value of $17,000, intended to represent the actual money paid in by Sundy for the business and providing for the exact amount to be determined after an audit was made. Paragraph 5 alleges that the defendant thereafter paid to the plaintiff $10,000 cash and executed a note in the amount of $7,000, though the plaintiff never furnished the audit and has never shown correctly the amount paid into the business by the plaintiff. Paragraph 6 alleges that the plaintiff knowingly and deliberately furnished to the defendant false and fraudulent listing of the accounts payable of the company intending thereby to deliberately mislead the defendant and intending thereby to deliberately and fraudulently misrepresent to the defendant the condition of the business. Paragraph 7 alleges that on July 31, 1954, the defendant began paying for all purchases for the corporation personally so that thereafter no indebtedness was incurred on accounts. Paragraph 8 alleges that the plaintiff furnished to the defendant what was purported to be a complete list of all accounts payable as of July 31, 1954, which list was incomplete and inaccurate and did not truly indicate the total amount of indebtedness of the business, the plaintiff then knowing that the list was false, inaccurate and untrue. Paragraph 9 alleges that the defendant did not at that time know that the list was not accurate and complete inasmuch as the defendant did not keep the books and records, and that such was a false and fraudulent representation on the part of the plaintiff. Paragraph 10 alleges that the defendant did not learn of the true status and amount of accounts payable until after the note was
executed; that he relied on the statement of accounts as given to him by the plaintiff, but later learned that the said list was false, incomplete, fraudulent and inaccurate in that it did not show certain itemized indebtedness totaling $4,279.83 listed in detail in the answer but not listed on the list furnished to the defendant by the plaintiff. Paragraph 11 alleges that the plaintiff knew that the list was inaccurate and incomplete at the time he falsely represented that the list was true, accurate and complete at the time the note was executed; that the plaintiff deliberately and wilfully concealed the falsity, inaccurateness and incompleteness of said list from the defendant. Paragraph 12 alleges that, during the time from July 1954 until the note was executed, the plaintiff falsely and fraudulently represented to the defendant that he had actually paid into the business $17,000; that this false and fraudulent representation was made and continued to be made for the purpose of defrauding the defendant and for the purpose of fraudulently obtaining from him $10,000 cash and the $7,000 note. Paragraph 13 alleges the deliberate and wilful concealment by the plaintiff of the indebtedness of $4,279.83, thus falsely and fraudulently inducing the defendant to believe that the business was actually worth $17,000 more than the plaintiff had put in, when actually the plaintiff had a net amount put in the business of far less than that figure. Paragraph 14 alleges that the defendant relied on the representations made by the plaintiff as to the indebtedness of the business. Paragraph 15 alleges that, had the false and fraudulent representations not been made to the defendant, and had the defendant been informed of the actual amount of indebtedness, the defendant would never have signed the $7,000 note. This paragraph also alleges that in addition to fraud, a lack and failure of consideration was shown. Paragraph 16 alleges that on or about April 5, 1954, the plaintiff withdrew from the business certain building material of the approximate value of $2,800 for the personal and private use of the plaintiff, and that this was never paid for or returned as an asset to the business, and further that this fact was concealed from the defendant. Paragraph 17 alleges that the plaintiff continuously concealed from the defendant that he had taken this property without paying for it. Paragraph 18 alleges that this situation continued to exist and was a part and parcel of the fraud perpetrated by the plaintiff before and at the time of the execution of the note. Paragraph 19 alleges that the plaintiff did this with the intent to have the defendant believe that the net amount that the plaintiff had in the business was $2,800 more than the actual amount. Paragraph 20 alleges that had that situation been known to the defendant, the note upon which suit is brought would never have been given. Paragraph 21 alleges that the defendant relied on the representations that the plaintiff had paid $17,000 into the business and relied on the plaintiff's false representation that the material had been paid for. Paragraph 22 alleges that the $10,000 cash and $7,000 note sued on were supposed to be, and understood by both parties to be, for the plaintiff's interest in the business, whereas the interest was $2,800 less in one respect and $4,279.83 less in the other respect, which added up to a failure of consideration for the cash as well as for the note. Paragraph 23 alleges that the material consisted of a list too long to be incorporated in the petition but was incorporated by Exhibit A. Paragraph 24 alleges that all the misrepresentations were done deliberately and fraudulently by the plaintiff for the purpose of procuring from the defendant the $10,000 cash and the note on which suit is brought; that there was a complete failure and lack of consideration for the note sued on; that there was a lack of consideration in the amount of $79.83 for the $10,000 cash paid to the plaintiff by the defendant. Paragraph 25 alleges that at the home the plaintiff and the defendant purchased the interest of Mr. and Mrs. Reese in Glynn Isles the plaintiff and the defendant executed to Mr. and Mrs. Reese a note in the amount of $9,100 dated May 26, 1955 [1954] payable $200 per month for the first ten months and $1,600 per month for the next four months and $700 the fifteenth month, all payments bearing 6% interest with the final payment become due August 26, 1955. Paragraph 26 alleges that the $9,100 note was a personal note signed by the plaintiff and the defendant in their individual capacities and was no obligation on the business. Paragraph 27 alleges that the plaintiff completely failed and defaulted on the payment, he having made only two payments thereon totaling $403, but that these two payments were not made by the plaintiff in his personal and individual capacity but were made from
the funds of the business. Paragraph 28 alleges that the plaintiff refused to pay any part of the note and that the defendant has had to pay the entire amount. Paragraph 29 alleges that the plaintiff represented his half of the payment due on this note to be included in his $17,000 interest in the company. It is further alleged that by reason of the plaintiff's failure to pay his part of this note, his actual interest in the company was $4,550 less than the $17,000 claimed to be his interest, making a total failure of consideration of $11,629.83. Paragraph 30 alleges that prior to the execution of the note the plaintiff fraudulently represented that he would pay his $4,550 obligation to the Reeses and that this representation was relied on by the defendant when he paid $10,000 cash to the plaintiff and executed a note for $7,000, neither of which would have been done except for the fraud of the plaintiff.
Paragraph 31 reads as follows: "For all of the reasons hereinabove set forth, J. L. Allgood shows that the note sued on by Sundy was fraudulently procured by false and material misrepresentation of material facts and that said note was, is and always has been without any good or adequate consideration; that for all of these reasons and the ones hereinbefore shown said note is void and should be so declared; that J. L. Allgood is in no way indebted to James L. Sundy; that James L. Sundy is for all of the reasons hereinbefore shown indebted to J. L. Allgood in the total amount of $4,550 plus six per cent interest thereon for two years plus $2,800 plus $4,279.83 in that he has fraudulently procured those amounts from J. L. Allgood in the manner hereinabove shown, less Sundy's false and fraudulently procured note which is and should be void, Sundy being thus indebted to J. L. Allgood by reason of the facts herein shown for the actual cash that he has actually received from Allgood in the amount of $4,629.83 which amount J. L. Allgood prays recovery from James L. Sundy.
"Further answering J. L. Allgood shows that aside from and irrespective of the above cross-action, he, J. L. Allgood is in no way obligated to pay the note sued on by Sundy in that said note was by express consent of both parties given only as an approximation of obligation subject to be first proven, which [proof] Sundy has not provided, and J. L. Allgood shows that Sundy has been paid $10,000 cash for his interest paid in, net, in Glynn Isles, Inc., and that he, Sundy is legally and equitably entitled to no further payment until he first complies with the terms of the agreement of the parties upon which the note is based by showing his net paid in interest in the business at the time of his sale of his interest to Allgood.
"Wherefore, J. L. Allgood prays that recovery by Sundy be disallowed and that he, J. L. Allgood, have judgment against James L. Sundy in the amount of $4,629.83."
The plaintiff filed general and special demurrers to the answer. The court sustained part of the special demurrers, giving leave to the defendant to amend the answer. The court did not pass on the general demurrers at that time. The defendant amended the answer, whereupon the plaintiff renewed general and special demurrers to the answer as amended. The court overruled all of the plaintiff's demurrers to the amended answer and cross-action. The case proceeded to trial resulting in a finding by the jury in favor of the plaintiff in the amount of $2,450 plus 5% interest from September 20, 1954, to the time of the verdict, and plus attorney's fees. The plaintiff filed a motion for new trial on the statutory grounds and later amended by adding 5 special grounds. The court denied the motion for new trial, and it is on this judgment that the case is here for review as well as a review of the ruling on the demurrers to the answer and cross-action of the defendant.
The plaintiff made a motion for a judgment notwithstanding the verdict, which was denied. This is also before this court for determination.
J. 1. Counsel for the plaintiff states that it is the wish of counsel to present the argument in five sections, i.e. (1) the answer set forth no defense to the action, (2) because the answer attempts to add to and vary the term of a written contract, (3) the answer admits execution of the note for the amount stated and sets forth no valid defense against the plaintiff's petition, (4) that portion of the answer that tries to set forth a cross-action is without merit because no grounds for cross-action are set forth, and (5) all of the answer after paragraph 2 is without merit for the reason that said answer and attempted cross-action are not the kind of action that can be set forth in defense of a suit on a promissory note. We shall follow this method substantially in our opinion.
As to the general demurrers to the answer going to subsection (1) set out hereinabove, it is contended that when there is a plea that there is no indebtedness on the part of a defendant and the defendant proceeds to set forth certain facts specifically as constituting the reason for no indebtedness, such is not a plea of the general issue and there are not two pleas but one. Counsel cites Dendy v. Gamble & Copeland, 59 Ga. 434. The ruling there does not hold as authority for reversal of the instant case, because the answer in the instant case covered other allegations which were not shown in the cited case. It is true that a debtor should be diligent in informing himself regarding the status of the account for which the note is given, and in the absence of such diligence, ignorance of the status of the account can not be pleaded as a defense to an action upon the note, basing such plea upon alleged fraud in procuring the note where such plea does not show that artifice or trickery was used to prevent the debtor from discovering the alleged fraud. See Dortic v. Dugas, 55 Ga. 484 (6). It is true also that when a debtor fails to make himself cognizant of a situation before committing himself to pay obligations, such debtor manifests laches, against which neither a court of law nor of equity can give relief. See Hollingshead v. American Nat. Bank, 104 Ga. 250 (30 S. E. 728). However, in the instant case the record shows that no opportunity was given to the defendant to acquaint himself with the true facts. It is our opinion that the answer set forth a defense to the action. The court did not err in overruling the demurrers to the answer.
We will now discuss subsection (2) which goes to the demurrer to the effect that the answer attempts to add to and vary the terms of a written contract. This corresponds with the second paragraph of the demurrer to the answer. Code 20-704 provides: "Parol evidence is inadmissible to add to, take from, or vary a written contract. All the attendant and surrounding circumstances may be proved, and if there is an ambiguity, latent or patent, it may explained; so if a part of a contract only is reduced to writing (such as a note given in pursuance of a contract), and it is manifest that the writing was not intended to speak the whole contract, then parol evidence is admissible." This assignment of error is not well taken.
We will now discuss subparagraph (3) corresponding to paragraph 3 of the demurrer which sets out that in order for a cross-action to avail or for the defendant to properly plead a cross-action, such as here, the defendant must admit the execution of the note on which suit is brought, even though the defendant attempts to deny the execution of the note. The court did not err in the ruling on this portion of the demurrer.
Subsection (4) corresponding to paragraph 4 of the demurrer to the answer, sets out that the answer as amended pleads a memorandum agreement on which the promissory note was alleged to be based; that a cross-action must set forth with the same particularity as an original cause of action; that the attempted cross-action does not state how or in what manner the plaintiff was indebted to the defendant except on undisclosed amounts between the parties prior to the giving of the note; that the sale was consummated under the agreement and the note given which settled all accounts. The assignment of error as to this subdivision is not well taken.
We come next to discuss subsection (5), corresponding to paragraph 5 of the demurrer to the answer which demurred to all of the answer after paragraph 2 (which we have quoted hereinabove) for the reason that said answer and cross-action is not the kind of action that can be set forth in defense of a suit on a promissory note for the reason that both the purported account and the action on the promissory note to Mr. and Mrs. Reese were vague and indefinite and further that the record does not show that the note was assigned to the defendant; that the note did not show that the defendant had a right to recover on either the note or the account.
The answer and cross-action allege that the parties agreed to enter into a sale of property for a stated amount and at a certain time, and then alleges fraud and misrepresentation in a general way. In Dortic v. Dugas, 55 Ga. 484 (6), supra, this court said: "With equal opportunities for knowing the truth, a party grossly failing to inform himself must take the consequence of his neglect." See also Martin v. North Ga. Lumber Co., 72 Ga. App. 778, 781 (35 S. E. 2d 270). In that case the court stated that the plaintiff had the same opportunity as did the defendant to ascertain the amount of timber on her land, and that she was not prevented by fraud or deceit from having this done, and further that it does not appear that any relation of confidence or trust existed between the parties which would have authorized the plaintiff to rely on the alleged false representations. This court ruled that the trial court properly sustained the demurrers. We deem it prudent to quote the following excerpt from the opinion of the court in that case (p. 782): "Where a party by common caution and prudence can guard himself, the law will not protect him in his negligence, and one who grossly fails to inform himself must take the consequences of his neglect, there being no allegation in the petition showing that the plaintiff was fraudulently prevented from doing so." See also Lewis v. Foy, 189 Ga. 596 (6 S. E. 2d 788), Truitt-Silvey Hat Co. v. Callaway & Truitt, 130 Ga. 637 (2) (61 S. E. 481), Feingold v. McDonald Mortgage &c. Co., 166 Ga. 838 (145 S. E. 90), and Angier v. Equitable Building &c. Assn., 109 Ga. 625 (35 S. E. 64). In the instant case the defendant did not have the same opportunity as did the plaintiff to know the true status of the interest of the plaintiff or the status of the business, because the plaintiff had control of the books of the business and never furnished the results of a promised audit of the affairs of the business.
All objections to the overruling of the demurrers show no reversible error.
We come next to discuss the general demurrers to the answer covering paragraphs 25 through 31 inclusive. We have studied these paragraphs in relation to the demurrers and the rulings thereon and find that the court did not err in overruling the demurrers.
2. We decline to reverse the ruling of the court refusing to grant the motion for a judgment notwithstanding the verdict.
3. Special ground 1 assigns error because it is alleged that the court erred in charging the jury as follows: "Mr. Allgood files an answer to this petition setting up the allegation and contending the note was without consideration and was obtained by fraud and devices. And in this petition he filed a cross-action, and I am directing a verdict in the case against the cross-action, and I am submitting to you the question solely of the note and whether or not it was without consideration and obtained by fraud. Mr. Allgood contends in this case that it was without consideration and it was obtained by fraud, and since the execution of the note Mr. Allgood has paid for Mr. Sundy the sum of $4,279. He contends that was hidden indebtedness that he had to pay on the account of a misrepresentation of Mr. Sundy at the time of the execution of the note in question." It is contended that such charge is erroneous and injurious to the defendant because it was argumentative in that it expressed an opinion as to the contentions of the defendant in regard to the specific sum for which the defendant contended, and after directing a verdict against the cross-action, went further and picked out an amount contended by the defendant to be due him; that it was confusing and misleading to the jury. In view of the evidence and the pleadings in the instant case, the court did not commit reversible error as contended in this special ground.
4. Special ground 2 contends that the court erred in charging the jury as follows: "Fraud may exist from misrepresentation by either party, made with design to deceive, or which does actually deceive the other; and in the latter case such misrepresentation voids the instrument, though the party making it was not aware that his statement was false.
"A fraudulent misrepresentation may be perpetrated by acts as well as words, and by artifices as well as by acts and words.
"Concealment of material facts may in itself amount to a fraud, when from any reason, one party has a right to expect full communication of the facts from the other; or where one party knows the other party is laboring under a delusion with respect to the matter under consideration, and yet keeps silent.
"Suppression of a fact material to be known, and which the party is under obligation to communicate, constitutes a fraud. The obligation to communicate may arise from the confidential relations of the parties, or from the particular circumstances of the case.
"Fraud may be actual or constructive. Actual fraud consists in any kind of artifice by which another is deceived. Constructive fraud consists in any act of omission or commission contrary to legal or equitable duty, trust or confidence justly reposed, which is contrary to good conscience and operates to the injury of another. The former implies moral guilt; the latter may be co-existent with innocence.
"Misrepresentation of a material fact, made wilfully to deceive, or recklessly without knowledge, and acted upon by the opposite party, or if made by mistake and innocently, and acted on by the other party, constitutes legal fraud.
"In this case there must be the misrepresentation of a material fact, made wilfully to deceive, or recklessly without knowledge, and acted upon by the opposite party, in order for that to be applicable.
"Fraud may be consummated by signs, tricks, or through agents employed to deceive, or any other unfair way to cheat another."
It is contended that such charge was erroneous and not sound as an abstract principle of law, was not adjusted to the facts of the case and was injurious. In view of the whole charge of the court, it is our opinion that this ground is not cause for reversal.
5. Special ground 3 assigns error because it is contended that the following material evidence was illegally admitted by the court to the jury, over objections: "Q. Directing your attention again to exhibit C, attached to the amendment, what is that on the bottom of the exhibit, that is the note from you and Mr. Sundy to Mr. Reese? A. Correct. Q. What is that on the bottom of it? A. In consideration of the sum of $8,700 and an additional payment of $800 interest, the within note and all rights thereunder are hereby transferred and assigned to J. L. Allgood without recourse; this 4th day of May, 1955. Signed by Mr. A. E. Reese. Q. Did Mr. Sundy pay any part of that? A. No, sir. Q. Where is the original note, Mr. Allgood, the Reese note, do you have it or is it lost? A. As far as I know it's lost. Mr. Thompson might know where it is. Q. The things that you have testified about, did they have any effect upon your agreement, did they induce you to make your agreement or not? A. I'll put it this way, if I had known of the hidden indebtedness that came up at a later date, I would have never agreed to have bought any part of the interest until such time we knew that everything was right. I relied solely on Mr. Sundy for the rightness of what his investment was and what the condition of the corporation was, because he handled the books. Q. Suppose you had known that you would have to pay the entire obligation to the Reeses? A. I would have never entered into this agreement. Q. Suppose you had known that the $2,800 worth of building materials were not paid for, what effect would that have had? A. That would have had the same effect; all of these would have to be accountable for as his part of his investment as we agreed to in the contract, and if I had only known, I did everything I could to find out what the condition of the corporation was, and how much money he had in it, we asked for the audit, I would have either asked him to deduct it and then bought it, or I would have just let him have it and work it out the best way he could." The evidence was objected to at the time it was offered on the following grounds of objection: "I wish to object and ask the court to rule out all the testimony as to the purchase of the corporation, of the interest in the corporation from Mr. Reese by Mr. Sundy and Mr. Allgood. The evidence was that this was some several months beforehand and I don't think it would have anything to do with the question before the court. Also, as to the admissibility of the note from them to Reese. I object to the testimony of the list of accounts that Mr. Allgood claims on the theory that the list has not ever been produced in evidence, and any testimony as to this list, the written list, would be the highest and best evidence." There was a further objection to the effect that the party offered the evidence to which objection was made; that the court overruled the objection and admitted the evidence which was material, prejudicial and hurtful to the movant; because it allowed the jury to consider a transaction entered into before the note was given in settlement; because the defendant was the witness whose testimony was alleged to have been illegally admitted; that the inadmissibility of the evidence was beyond doubt.
The plaintiff and the defendant were coowners of the corporation, the plaintiff being the officer in charge of the books and records. The plaintiff furnished to the defendant a false listing of the accounts payable, showing the amounts to be greater than they were in fact, for the purpose of misleading the defendant into believing that the business of the corporation was of greater value than it was in fact. The agreement to pay $17,000 representing his one-half interest was subject to correction by a subsequent audit. This special ground shows no reversible error.
6. Special ground 4 assigns error because it is contended that the court erred in admitting the check from Glynn Isles, Inc., made payable to the Director of Internal Revenue shown as Exhibit No. 3 in the record. The plaintiff objected to the evidence as soon as and at the time it was offered and then urged that the check was dated and signed after the execution of the note and after the sale hall been completed and was therefore inadmissible; that the opposite party offered the evidence; that the court overruled the objection and admitted the evidence which was material, prejudicial and hurtful to the plaintiff; that the defendant was the witness whose testimony is alleged to have been illegally admitted. This special ground shows no reversible error for the same reason regarding special ground 3.
7. Special ground 5 assigns error because it is contended that the court erred in allowing the defendant to introduce the contract dated August 30, 1954, and shown as defendant's Exhibit No. 2. The plaintiff objected to the evidence at the time it was offered on the grounds that the note was given in a full closing of all prior accounts and that any evidence to go behind it would be inadmissible; that the defendant offered the evidence and was the witness whose testimony is alleged to have been illegally admitted; that the court overruled the objection and admitted the evidence, which was material, prejudicial and hurtful to the plaintiff.
This special ground shows no reversible error, under the record.
The court did not err in overruling the demurrers to the answer of the defendant, the motion for a new trial, or the motion for judgment notwithstanding the verdict.
Judgment affirmed. Carlisle, J., concurs. Townsend, J., concurs in the judgment.
Larsen & Larsen, W. W. Larsen, Jr., Harold E. Ward, contra.
H. Dale Thompson, for plaintiff in error.
DECIDED OCTOBER 29, 1957.
Saturday May 23 02:06 EDT


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