Atlanta Real Estate Co. v. Atlanta Nat. Bank
| Decision Date | 09 February 1886 |
| Citation | 75 Ga. 40 |
| Parties | THE ATLANTA REAL ESTATE COMPANY v. THE ATLANTA NATIONAL BANK et al. |
| Court | Georgia Supreme Court |
October Term, 1885.
1. The directors and managers of a corporation, who control and have charge of its effects, are trustees for the stockholders, and both they and others who, with the knowledge of their misappropriation, aid them in diverting its property, would be liable to the injured parties.
2. Equity was the proper forum in which to seek relief in such a case, and the bill was properly brought in the name of some of the stockholders in behalf of themselves and such of their co-corporators as are in a similar condition.
3. The bill is not multifarious nor objectionable on the ground of misjoinder of parties or causes of action.
4. There being no prayer for either an injunction or a receiver previous to the final trial, the bill was properly filed without the sanction of the judge.
( a. ) This case does not fall within the rule laid down in The Knoxville Iron Company vs. Wilkins Post & Company et al., 74 Ga. 493.
Corporations. Stock and Stockholders. Trusts and Trustees. Equity. Practice in Superior Court. Before Judge STEWART. Fulton County. At Chambers. January 17, 1885.
On March 27, 1884, the Atlanta National Bank et al. filed their bill against the Atlanta Real Estate Company, H B. Plant, W. T. Walters, B. F. Newcomer, R. B. Smith, R. T Wilson and E. W. Cole, alleging, in brief, as follows: In 1871, the Southern Railway Security Company was organized under the laws of Pennsylvania, and acquired a large amount of property, consisting of stocks, bonds, interests in railroads, etc. The complainants held stock in the company. Plant, Walters, Wilson and Newcomer were either directors or officers, or at least were of potent influence in the councils of the company, and they and Wilson held and controlled large blocks of the stock. Plant was the trustee and agent of the company, and was entrusted with the buying of lands necessary to a railroad proposed to be built by it. By agreement, he took titles thereto in his own name, but in fact it belonged to the company. In 1873, the directors began making representations that the company was embarrassed and would be crippled, and at a called meeting of the stockholders, held in New York, which the complainants did not attend, and of which they had no notice, but the defendants being largely in control of the stock present, a resolution was passed, authorizing the directors to sell to such stockholders as might elect to buy within ten days of a notice to be issued, certain of the most valuable securities belonging to it for certain prices, receiving one-half thereof in the company's own stock at par, though it was not worth that amount. There was no necessity for this, as the assets of the company were largely in excess of its liabilities to creditors. Plant, Walters, Wilson and Newcomer being thus in control, combined and confederated to possess themselves of the assets, and to leave the smaller stockholders to pocket the loss, and they have possessed themselves of the valuable assets of the company for inconsiderable sums, and large amounts of assets have disappeared from the company's possession and have been found to be in that of these defendants.
(Certain railroad stocks, bonds and interests are described.)
Plant, as the trustee of the company, bought certain land in the city of Atlanta and took a deed in his own name, though in fact it belonged to the company. Taking advantage of the fact that the deed was in his own name, he appropriated it to his own use, associated with himself Walters and Newcomer, who acted with full notice, and, for a very inadequate consideration, made a deed to himself and them, " trustees," his wife joining him. Other deeds (described in the bill) were taken by the " trustees" for the alleged purpose of protecting their title. In 1881, Plant, Walters and Newcomer," F" Ftrustees,'DD" claiming that they were not trustees for anybody but themselves and were tenants in common, made a deed to R. B. Smith, and he, in 1883, made a deed to the Atlanta Real Estate Company. None of these deeds contained a general warranty of title. Smith was not a bona fide purchaser for value, but a mere instrument of Plant to pass title to the Atlanta Real Estate Company, and was a mere naked holder of the legal title for that purpose, and that company is a mere cover for the interest of the present holders and pretended owners of the property, and was organized in order to handle it for sale for the benefit of such pretended owners. Walters and Newcomer transferred their interest in the property to Wilson and E. W. Cole; in December, 1883, Plant, Wilson and Cole obtained a charter under the name of the Atlanta Real Estate Company, and in the same month, Smith, without any consideration, conveyed the land to that company. The company and each of its corporators took with full knowledge of all the facts and the equities of the complainants. It is proceeding to plat the ground with a view to selling it to innocent purchasers. Smith is a mere figurehead, without means and with no real interest in the property, and merely held the dry, legal title to convey as he was directed, without any consideration.
The prayers were for an accounting for the assets of the Southern Railway Security Company and its stockholders, and that a receiver be appointed to take charge of the property of the Security Company and to receive and administer it and whatever may be recovered in this suit, and that the defendants be forever enjoined from selling, renting, using or interfering with any of the property which might be decreed to be the property of the Southern Railway Security Company or its stockholders, and for subpœ na and...
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