Hood Ex Rel. Bank of Pender v. Paddison

ClasksoN, J. The question involved: May tbe defendant, alleged owner of capital stock in a defunct State bank, in an action by tbe Commissioner of Banks to recover of the defendant the amount of his statutory liability as such stockholder, avail himself of tbe defense that he was induced to purchase said stock by the false and fraudulent representations of the condition of the bank by its president? We think, under the facts and circumstances of this case, that there was sufficient competent facts alleged by defendant on the record, to be submitted to the jury on the question involved. The defendant, as a defense, alleged and set up actionable fraud on the part of tbe president of tbe bank, in the purchase of tbe stock. Whatever may be the English decisions and some of the American decisions, this Court has held that actionable fraud, if shown, is a good defense. In Chamberlain v. Trogden, 148 N. C., 139 (140-141), speaking to the subject, citing numerous authorities, is the following: “There is some conflict of authority as to the right of a subscriber to rescind his subscription or maintain a defense to his obligation therefor on the ground of fraud, after the corporation has become insolvent and its affairs have passed into the possession and control of a receiver or the bankruptcy court, or other method of general adjustment, primarily for the benefit of creditors. The English cases and some courts in this country have held that, under conditions indicated, it is no longer open to the subscriber to maintain such a defense. These English decisions, however, are said to be based to some extent on tbe construction given *635 to certain legislation on tbe subject, and tbe weight of authority in tbis country seems to establish that, under exceptional circumstances, tbe subscriber may avail himself of tbe position suggested even after insolvency. . . . All- of tbe authorities, however, are to tbe effect that, in order to do so, tbe subscriber must act with promptness and due diligence, both in ascertaining tbe fraud and taking steps to repudiate bis obligation.” Tbe president of the bank bad authority to make tbe alleged contract. Warren v. Bottling Co., 204 N. C., 288 (290). Tbis whole matter is thoroughly discussed in Hood v. Martin, 203 N. C., 620, citing tbe Chamberlain case, supra. Tbe period prescribed for tbe commencement of action, N. 0. Code, 1931 (Micbie), section 441, in part: “Within three years an action — (1) Upon a contract, obligation or liability arising out of a contract, express or implied, except those mentioned in tbe preceding sections. . . . (9) For relief on tbe ground of fraud or mistake; tbe cause of action shall not be deemed to have accrued until tbe discovery by tbe aggrieved party of the facts constituting tbe fraud or mistake.” Tbe statute runs from tbe discovery of tbe fraud or when it should have been discovered in tbe exercise of ordinary care. In tbe present case, we think tbe facts on tbe record, sufficient to be submitted to tbe jury on tbe issues tendered by defendant. Tbe question of tbe transfer of tbe stock to Hugh Overstreet,-Jr., a minor, is abandoned on tbis appeal by tbe defendant. See In re Trust Co., 203 N. C., 238; Early v. Richardson, 280 U. S., 496, found on page 658 of 69 A. L. R., annotation, in part, on page 684. For tbe reasons given, tbe judgment of tbe court below is Reversed. OoNNOR, J., dissents. SoiieNCK, J., took no part in tbe consideration or decision of tbis case.