Allen v. Investors Syndicate

• Decision Date: 24 January 1946
• Docket Number: 3 Div. 436.
• Citation: 24 So.2d 909,247 Ala. 386
• Parties: ALLEN v. INVESTORS SYNDICATE et al.
• Court: Alabama Supreme Court

24 So.2d 909

247 Ala. 386

ALLEN v. INVESTORS SYNDICATE et al.

3 Div. 436.

Supreme Court of Alabama

January 24, 1946

Solomon & Berkowitz and Harvey Deramus, all of Birmingham, for appellants.

Meader Jones & Murray, of Montgomery, Bainbridge & Mims and Chas. W. Greer, all of Birmingham, Steiner, Crum & Weil of Montgomery, and Wm. N. McQueen, Atty. Gen., for appellees.

BROWN, Justice.

The original bill was filed by Ethel Cohn Green, Doris Fox, as administratrix of the estate of Ruben Fox, deceased, Robert Berman, Nathan Allen and Sol Rittenbaum, against Investors Syndicate, a Minnesota corporation organized in 1894 Investors Syndicate of America, Inc., a Minnesota corporation organized in 1941, the Investors Mutual, Inc., a Nevada corporation formed in 1941, and the First National Bank of Montgomery, organized and existing under the National Banking Act. All of said corporations, as alleged in the bill, have qualified to do business in Alabama.

The bill seeks to enjoin the 'Syndicate', the 'Mutual' and the 'America' from selling or offering for sale any of their securities in the State of Alabama. To enjoin said corporations from paying cash surrenders and loans to certificate holders and to segregate and impound all income payments from certificate holders to enjoin the respondents from paying any dividends upon capital stock. To restrain respondents from making or causing to be made to any holder of certificates issued by the respondent Syndicate from exchanging certificates and securities issued by the 'Mutual' and 'America'. To compel the Syndicate to deposit with the bank in securities an amount equalling an additional ten percent of its face liabilities to certificate holders resident in Alabama. To restrain and enjoin the respondents from removing out of the State of Alabama any of their assets, records, books or papers; for appointment of a temporary receiver to take over the trust property now in the hands of The First National Bank of Montgomery, said trust property consisting of solvent liquid securities of approximately $5,500,000 value, equalling one hundred percent of Syndicate's face liability to certificate holders in Alabama; and for other and general and special relief.

Before the decree appealed from was entered, Ethel Cohn Green and Sol Rittenbaum were stricken as complainants by amendment to the bill, and 'William N. McQueen, as Attorney General and as Acting State Securities Commissioner' of the State of Alabama, was added as a party defendant.

The defendants separately filed demurrers to the bill and to the bill as last amended, the court sustained the demurrers, and from that decree Nathan Allen has appealed, and has made on the record seventy-three assignments of error, which, in argument and brief, appellant treats in bulk.

To state the substance of the allegations of the bill, Investors Syndicate up until the organization of America and Mutual had engaged in the business, for fifty years or more, of issuing 'investment certificates' to its clientele upon each making a cash payment and agreeing to pay installments of like amounts in advance for fourteen years, aggregating fifteen payments, to pay the sum stated in the face of the certificate upon its surrender, which included the principal paid and its earnings, amounting to 5 1/2 percent or more. To illustrate, a certificate issued on the 23d of March, 1937 upon the payment by the certificate holder of $600 and agreement to pay a like sum for fourteen years, annually in advance, Investors Syndicate pledged itself to pay such holder the sum of $12,500. The certificate contract carried nonforfeiture stipulations to the general effect that in case of default in the payments when due, continuing through less than two years, the contract could be reinstated without decreased value during the default period, and the maturity date would be extended for the time of the lapse in payments. If payments are discontinued for two years or more, the certificate holder is to receive a sum payable under optional settlements provided for in the certificate. Provision for optional settlements in the event of death or disability; for loans on contract; optional settlements prior to maturity if certificate contract has been in force for 'one or more completed contract years'; and the right to election at any time after a contract has been in force for seven contract years to convert the contract into 'annuity certain'. The appellant Nathan Allen owned one of said certificates of the face value of $1,000.

America and Mutual are affiliated corporate persons owned and controlled by Syndicate, and since their organization certificates of like character are being issued through America. During the existence of Investors Syndicate it has engaged in business in several states of the United States and by the National and Securities Exchange Act of Congress embodied in Chapter 2D, Title 15, § 80a-1, U.S.C.A., is declared to be 'affected with a national public interest.'

Through the years Syndicate had accumulated 'aggregate assets of approximately $175,000,000.00' at the time the bill was filed, and at that time its total liabilities were approximately $171,000,000. America, at about the time the bill was filed, had principal assets of approximately $12,000,000.

Allen, a resident of the State of Alabama, purchased his certificate after Syndicate had qualified to do business in Alabama, and as a condition precedent to its engaging in business, the State Securities Commissioner of Alabama, for the protection of Alabama investors, required Syndicate to deposit in the First National Bank of Montgomery, Alabama, $5,500,000 in securities consisting primarily of F.H.A. real estate mortgages and other solvent securities, and the solvency of said securities and their value is not questioned in this bill. Nor is the bank, as trustee, charged with any violation of its duties in keeping and maintaining said fund, the securities so deposited being equal to one hunderd percent of Syndicate's face liability to Alabama investors.

There is an absence of averment in the bill that either of said respondents are...