## Facts

- Newman Machine Company, Inc. was a closely held North Carolina corporation formerly controlled by George F. Newman, Jr., individually and as trustee for his children.
- Newman owned a controlling block of shares (individually and as trustee) and, while president with access to corporate records, sold all of those shares back to the corporation on February 6, 1959, for a stated per-share price and total consideration.
- Years later, Newman asserted the shares were undervalued at the time of sale and notified the corporation that counsel was investigating the transaction.
- Newman sent communications threatening to disaffirm the sale and to pursue remedies such as rescission, damages, or receivership, and made repeated demands on the corporation.
- The corporation alleged the threats and demands impaired its operations, interfered with planning, and jeopardized its continued existence.
- The corporation sued seeking (1) a declaration validating the stock sale and defining the parties’ rights, and (2) equitable relief to remove an alleged cloud on its title to the shares.

## Issues

1. Whether the complaint alleged an actual, present controversy sufficient to support jurisdiction under the North Carolina Declaratory Judgment Act.
2. Whether a court of equity may entertain an action to remove a cloud on title to personal property, specifically corporate shares, despite the absence of a quiet-title statute for personal property.
3. Whether the complaint was subject to dismissal on demurrer at the pleading stage.

## Decision

- The Supreme Court of North Carolina reversed the Court of Appeals and reinstated the trial court’s order overruling the demurrer.
- The Court held the complaint alleged a genuine, present controversy suitable for declaratory relief based on sustained threats and their asserted ongoing effects on the corporation.
- The Court held equity has jurisdiction to remove a cloud on title to personal property, including corporate stock.
- The case was remanded for further proceedings on the merits; the Court did not decide whether Newman’s threatened substantive claims would ultimately succeed.

## Legal Principles

- A declaratory judgment action requires an actual, genuine controversy; however, repeated and concrete threats affecting current legal relations and business operations may satisfy that requirement even before a coercive action is filed.
- On demurrer, well-pleaded facts and reasonable inferences are taken as true; in declaratory actions, dismissal is improper where the pleading shows entitlement to a judicial declaration, regardless of whether the plaintiff will ultimately prevail.
- Equity’s power to remove a cloud on title is not confined to real property; absent statutory procedure for personalty does not eliminate equitable jurisdiction to quiet adverse claims to personal property.

## Conclusion

The court allowed a corporation to proceed with a declaratory judgment and equitable quiet-title-type claim where a former controlling shareholder’s sustained threats to unwind a stock sale created an immediate dispute, and it confirmed that equity may remove clouds on title to corporate shares.


Newman Mach. Co. v. Newman, 275 N.C. 189, 166 S.E.2d 63 (N.C. 1969)