Steele v. Locke Cotton Mills Co.

Annotate this Case

58 S.E.2d 620 (1950)

231 N.C. 636


No. 665.

Supreme Court of North Carolina.

March 29, 1950.

*623 Hartsell & Hartsell, Concord, for defendants-appellants.

Carroll & Steele, Rockingham, for plaintiff-appellee.

ERVIN, Justice.

It is a basic rule of pleading that a complaint must allege every material fact necessary to sustain the right of the plaintiff to the relief which he seeks. Potter v. National Supply Co., 230 N.C. 1, 51 S.E.2d 908. In consequence, we confront this primary question at the threshold of this appeal: Where a stockholder applies for a writ of mandamus to compel the directors of a corporation to declare and pay a dividend, must he allege in his complaint that the corporation has surplus or net profits available for the payment of such dividend at the time when the action is brought and the application for the writ is made?

The solution of this problem is to be found in the legal principles relating to the declaration and payment of corporate dividends, and governing the issuance of writs of mandamus.

G.S. § 55-116 expressly provides that "no corporation may declare and pay dividends except from the surplus or net profits arising from its business". The method of determining what constitutes surplus or net profits available for dividends is prescribed by G.S. § 55-115, which reads as follows: "The directors of every corporation created under this chapter shall, in January of each year, unless some specific time for that purpose is fixed in its charter, or by-laws, and in that case at the time so fixed, after reserving, over and above its capital stock paid in, as a working capital for the corporation, whatever sum has been fixed by the stockholders, declare a dividend among its stockholders of the whole of its accumulated profits exceeding the amount reserved, and pay it to the stockholders on demand. The corporation may, in its certificate of incorporation or bylaws, give the directors power to fix the amount to be reserved as a working capital."

These statutes establish these propositions: (1) That where the accumulated profits of a corporation have been ascertained in conformity with G.S. § 55-115, a legal duty devolves upon the directors to declare a dividend among the stockholders of the whole of the accumulated profits and to pay the same to the stockholders on demand, Amick v. Coble, 222 N.C. 484, 491, 23 S.E.2d 854; Cannon v. Wiscassett Mills Co., 195 N.C. 119, 141 S.E. 344; and (2) that neither the capital stock of a corporation, paid in and outstanding, nor its working capital, as fixed pursuant to the provisions of G.S. § 55-115, may be impaired by the payment of a dividend under any circumstances. Cannon v. Wiscassett Mills Co., supra.

It is not the office of mandamus to redress a past legal wrong, or to prevent a future legal injury, The writ of mandamus is a command issuing from a court of competent jurisdiction, directed to some board, corporation, inferior court, officer, or person, requiring the performance of a particular duty therein specified, which duty results from the official station of the party to whom it is directed, or from operation of law. City of Hickory v. Catawba County, 206 N.C. 165, 173 S.E. 56; 34 Am.Jur., Mandamus, section 2; 55 C.J.S., Mandamus, § 1.

Mandamus will not lie unless the party seeking the writ has a clear legal right to the performance of the act sought to be enforced, and the party to be coerced is under a positive legal obligation to do what he is asked to be made to do. Ingle v. State Board of Elections, 226 N.C. 454, 38 S.E. 566; Warren v. Maxwell, 223 N.C. 604, 27 S.E.2d 721; City of Raleigh v. Raleigh City etc. Public School System, 223 N.C. 316, 26 S.E.2d 591; Poole v. State Board of Cosmetic Art Examiners, 221 N.C. 199, 19 S.E.2d 635. Hence, it is well settled that a plaintiff, who seeks relief by way of mandamus, must show that he has a present clear legal right to the thing claimed, and that it is the duty of the defendant to render it to him. Lyon v. Commissioners, *624 120 N.C. 237, 238, 26 S.E. 929; Brown v. Turner, 70 N.C. 93. The right of the plaintiff and the duty of the defendant must exist at the time when the application for the writ is made. United States ex rel. International Contracting Co. v. Lamont, 155 U.S. 303, 15 S. Ct. 97, 39 L. Ed. 160; Frankel v. Woodrough, 8 Cir., 7 F.2d 796; Christ v. Superior Court of City and County of San Francisco, 211 Cal. 593, 296 P. 612; State ex rel. Walker v. Best, 121 Fla. 304, 163 So. 696; Kavanaugh v. Chandler, 255 Ky. 182, 72 S.W.2d 1003, 95 A.L.R. 273; Dorsey v. Ennis, 167 Md. 444, 175 A. 192; State ex rel. McHose v. District Court of Fourteenth Judicial District in Golden Valley County, 95 Mont. 230, 26 P.2d 345; State ex rel. Cashman v. Carmean, 138 Neb. 819, 295 N.W. 801; Washington Ass'n of New Jersey v. Middleton, 165 A. 423, 11 N.J.Misc. 277; State ex rel. Hamilton v. Cohn, 1 Wash. 2d 54, 95 P.2d 38; State ex rel. Portage Drainage Dist. v. Newby, 169 Wis. 208, 171 N.W. 953; State ex rel. Redenius v. Waggenson, 140 Wis. 265, 122 N.W. 726, 133 Am.St.Rep. 1075. If a plaintiff loses a once-existing right to invoke the remedy of mandamus for any reason before the writ is granted, the writ must be denied. State ex rel. Cary v. Cochran, 138 Neb. 163, 292 N.W. 239; People ex rel. Walter v. Kaplan, 117 Misc. 257, 192 N.Y.S. 105; State v. Miller, 69 Tenn. 596. This is so even though the loss of the right occurs during the pendency of the action, Betts v. Raleigh, 142 N.C. 229, 55 S.E. 145; Colvard v. Board of Commissioners, 95 N.C. 515; or is due to the fault of the party against whom the writ is sought. People ex rel. Walter v. Kaplan, supra.

These things being true, it is obligatory for a plaintiff, who seeks a mandamus to compel a defendant to perform an alleged duty, to allege in his complaint all facts necesssary to show that the plaintiff has a clear legal right to the performance of the particular duty at the hands of the defendant at the time when the action is begun and the application for the writ is made.

It necessarily follows that in order to show a present clear legal right on his part to have the directors of a corporation to declare and pay a dividend on his stock, a stockholder, who sues for a mandamus to compel the declaration and payment of such dividend, must allege in his complaint facts disclosing that the corporation has surplus or net profits available for the payment of the dividend within the purview of G.S. § 55-115 and G.S. § 55-116 at the time when he brings his action and applies for the writ.

The secondary question arising on the appeal is this: Does the complaint allege that the defendant corporation had surplus or net profits available for dividends when the action was begun and the application for the writ of mandamus was made?

The complaint does not specifically state that the corporation had accumulated profits at that time, i. e., on October 11, 1949. It is manifest that our present inquiry must be answered in the negative unless this essential fact can be inferred from the express averment that "on January 1, 1949, there were undivided profits in the defendant corporation in the sum of $81,604.22 available for the payment of dividends on the cumulative preferred stock."

The plaintiff earnestly insists that this inference must be made. To sustain this position, he cites this statement: "It is well established that when the existence of a person, a personal relation, or a state of things is once established by proof, the law presumes that the person, relation, or state of things continues to exist as before, until the contrary is shown, or until a different presumption is raised from the nature of the subject in question." 20 Am. Jur., Evidence, section 207. The precise scope of the rule invoked by plaintiff is perhaps more accurately delineated in Fanelty v. Rogers Jewelers, Inc., 230 N.C. 694, 55 S.E.2d 493. Be this as it may, the authority cited by plaintiff is not germane to our present problem, which must be solved by the rules of pleading and not by the rules of evidence.

*625 The common-law rule that pleadings are to be construed most strongly against the pleader has been abrogated in this State by G.S. § 1-151 which expressly stipulates that "in the construction of a pleading for the purpose of determining its effect its allegations shall be liberally construed with a view to substantial justice between the parties." Cole v. Wagner, 197 N.C. 692, 150 S.E. 339, 71 A.L.R. 220.

This statutory rule of liberal construction applies where a complaint is attacked by a general demurrer asserting that it does not state facts sufficient to constitute a cause of action. Wilson v. Chastain, 230 N.C. 390, 53 S.E.2d 290. In such case, the complaint is construed to aver all the facts that can be implied by fair and reasonable intendment from the facts expressly stated. Seawell v. Chas. Cole & Co., 194 N.C. 546, 140 S.E. 85. But the rule of liberal construction can not be invoked to read into the complaint an essential fact which has been omitted from it by the pleader. Lowman v. Abee, 191 N.C. 147, 131 S.E. 277.

The law has devised a practical test for determining what inferences fairly and reasonably follow from facts expressly stated in a pleading. It is simply this: A fact essential to a cause of action is not alleged when it is only to be inferred as a conclusion from other facts specifically averred, which are not inconsistent with the opposite conclusion. West v. Spratling, 204 Ala. 478, 86 So. 32; Coolbough v. Roemer, 30 Minn. 424, 15 N.W. 869; Jacobs v. Monaton Realty Inv. Corp., 212 N.Y. 48, 105 N.E. 968; Maylender v. Fulton County Gas & Electric Co., 131 Misc. 514, 227 N.Y.S. 209; Cohn-Hall-Marx Co. v. Gutman, Sup., 185 N.Y.S. 182; Belmont v. New York, 191 App.Div. 717, 182 N.Y.S. 173.

Corporate surpluses, like riches, have wings. They are here today, and gone tomorrow. The presence of such a surplus on a particular occasion is not inconsistent with its absence nine months later. Hence, the fact that a corporation has accumulated profits on hand on October 11, 1949, can not be fairly and reasonably inferred from the specific averment that it possessed such profits on January 1, 1949.

For the reasons given, the judgment overruling the demurrer must be


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