Heath v. Craighill, Rendleman, Ingle & Blythe, P.A

388 S.E.2d 178 (1990)

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Nature of the Case

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Facts

Clarkson was an officer, director, and employee in D when it incorporated as a professional association in July 1972. Clarkson performed various legal services, including the preparation of a will, codicils, and a continuing power of attorney for P. Another member of the firm, Blythe, handled real estate matters for P. In October 1982, Clarkson telephoned to solicit P's investment 'in some type of oil-related venture.' When P returned the call, Clarkson told him that another investor had been found. In the winter and spring of 1983, Clarkson proposed two other investments. P declined both offers. In August 1983 Clarkson, promising a 'two-to-one return,' persuaded P to invest in an 'Arab oil deal' with a 'group of American investors' represented by Richard Seaman of Florida. Clarkson gave P his own promissory note for $50,000 in return for $25,000 investment. The note was payable on 30 September 1983. When the note came due, Clarkson promised an additional $12,500 in return for a two-week delay. D agreed to the new date and collected $62,500, representing a return on his money of one hundred and fifty percent in sixty days. In early October, by letter dated 30 September 1983, effective the same day, Clarkson resigned from P. The firm allowed him to remain in its offices for about two months until he negotiated a lease on an office condominium. Clarkson proposed another investment in foreign oil exploration which would yield investors a one hundred percent return. P gave Clarkson $50,000 and took a note for $100,000 payable 19 December 1983. P requested and received from Clarkson a letter which read: 'This is to confirm that the funds to pay off my note of even date will come from a legitimate banking source and not from the sale of drugs, any criminal activity or a Communist Bloc Country.' Clarkson solicited a final $25,000 from Heath, who declined the invitation until promised a 'three-to-one return on this last phase . . . .' On 19 November 1983 P exchanged $25,000 for Clarkson's note in the amount of $75,000 payable 19 December 1983 and a second letter from Clarkson stating 'that the funds to pay off our loan of today will not come from any drug or criminal sources or any other illegal source.' Clarkson wrote personal checks to pay them. His checks were dishonored. In February 1984, Clarkson paid P $ 50,000. Subsequently, that payment was identified as a preference by Clarkson's trustee in bankruptcy, and $37,500 was reclaimed in the bankruptcy proceedings. P sued D for agency, breach of fiduciary duty, negligence, and violation of N.C. Gen. Stat. Chap. 78A (North Carolina Securities Act). Ds moved for a directed verdict on all issues. The trial court denied it as to the first (agency) claim. Fs renewed their motion for a directed verdict on the first claim. The court denied the motion, and the jury returned a verdict for P in the amount of $25,000. Ds moved for judgment notwithstanding the verdict and it was granted. P appealed.