CAPPS v. EDWARDS

Supreme Court of Georgia1908-02-22

130 Ga. 146

Summary · law.co

Holding. The judgment is affirmed. The petition sufficiently alleges a cause of action for breach of an executory contract to sell stock, and the objectionable portions of the defendant's answer should have been struck, making any trial error harmless.

The plaintiff sought to enforce a written contract to sell 65 shares of corporate stock to the defendant at an agreed price. The defendant challenged whether the petition stated a valid cause of action, arguing that the plaintiff had not properly alleged a stock subscription in the Capps Cotton Mill. The court held that although the petition did not expressly state the subscription in those exact words, the facts alleged—that the company issued stock to the plaintiff pursuant to their agreement and the plaintiff paid for it—sufficiently demonstrated the subscription occurred and constituted valid consideration for the defendant's promise to purchase.

The defendant also filed an answer containing allegations about prior negotiations and claims that the contract was void for lack of consideration. The court determined that these defenses should have been struck from the answer because prior negotiations are merged into the final written contract, and the court had previously ruled that the contract was unambiguous and binding. The defendant's answer admitted the material allegations of the petition except for denying liability, which meant that no genuine factual dispute remained for trial.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a petition alleges stock subscription when it shows stock was issued and paid for pursuant to a contract
Whether prior negotiations can be raised as a defense when merged into a subsequent written contract
Whether a motion to dismiss should focus on whether the entire petition fails to state a cause of action, rather than specific defects in pleading

Procedural posture

The case returned to the court on appeal following a prior decision that the underlying contract was valid and unambiguous.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Atkinson, J.

An oral motion to dismiss the plaintiff’s ease, because no cause of action is set out in the petition, may be made at any stage before verdict. Kelly v. Strouse, 116 Ga. 872 (1). If a defendant neglects at the appearance term to point out any particular defect by way of written demurrer, the whole petition, including the exhibits, will be examined to ascertain whether a cause of action is set forth. The question, in an oral motion to dismiss, is not whether any particular allegation has been defectively pleaded, but whether the petition in its entirety fails to set out -a cause of action. It was insisted, on the oral motion to dismiss, that the consideration for the promise is alleged to be the plaintiff’s subscribing $6,500 to the Capps Cotton Mill, and that there is no allegation in the petition that the plaintiff had subscribed to any stock. It is true it is not alleged in totidem verbis that the plaintiff had subscribed tcrstock in the Capps mill, but it does appear that, acting upon the agreement, he procured the company to issue to him the amount of stock for which he was obligated to subscribe, and for which he paid the company its par value, and that the stock was issued subsequently to and in pursuance of the contract, and a certificate issued by the Capps Cotton, Mill to the plaintiff. The issuance of the stock necessarily presupposes that there was an application for the same; and it is immaterial, after the issuance of the stock, whether the application was made verbally or by a written stock subscription, as the whole purpose of the subscribing to the stock is to render the subscriber liable to the corporation and bound to take the stock. When the stock has been issued and paid for, the question of stock subscription becomes immaterial.

Although the -petition prays for the specific performance of the executory contract of sale, and, alternatively, that, if this relief can not be afforded, he recover damages, yet it is clear, from the allegations of the petition and from its general structure, that the suit is for a breach of the executory contract of sale declared upon. The petition sets out a written agreement whereby the plaintiff agreed to sell 65 shares of corporate stock for a stipulated amount at a certain time, and the defendant agreed to buy upon those terms. The tender of the stock is alleged, and the refusal of the defendant to comply with the terms of his contract and buy the stock is also alleged; and the suit, therefore, is to recover the value of the stock according to the terms of the contract.

Several paragraphs of the plea, relating to the history of the stock subscription of the Capps Cotton Mill, and especially that paragraph which alleges that the subscription of the plaintiff to the $6,500 of stock had already been made at the time the contract sued on was entered into between the parties, and for that reason the contract was nudum pactum, should have been stricken, for the reason that when the case was formerly before this court (122 Ga. 827), it was held that the contract sued on was not ambiguous, and comprehended an agreement on the part of the defendant and the plaintiff for the sale of stock in a commercial enterprise. The agreement to sell furnished the consideration for the agreement to buy. The remainder of the answer, which, alleges that certain negotiations were pending between the plaintiff and the defendant -prior to the execution of the contract declared upon, as furnishing a basis for recoupment, should have been stricken, for the reason that all prior negotiations are merged into the subsequent written contract. The allegations are not sufficient as an attack upon the contract on the ground of fraud, because fraud, to be thé basis of rescission or reformation of a contract, must refer to fraud in the execution thereof. A written contract will not be rescinded or reformed because of the omission of any antecedent parol condition or stipulation, unless it is alleged that it was omitted at the time of the execution of the ■contract, through fraud, accident, or mistake. Smith v. Newton, 59 Ga. 113. See also Arnold v. Malsby, 120 Ga. 586. From what has just been said it follows that all that part of the answer which the court refused to strike, and of which complaint is made in the bill of exceptions, should have been stricken on demurrer. The answer admitted the allegations of the petition, except as to the defendant’s liability; and, inasmuch as such allegations set out a cause of action, it would have been proper for the court, after striking the objectionable parts of the answer, to direct a verdict in favor of the plaintiff: this upon the ground that there would be no issue between the parties. Therefore any possible error committed on the trial would be harmless, and need not be considered.

Judgment in both cases affirmed.

All the Justices concur, except Holden, J., who did not preside.