Baker v. Calloway

• Decision Date: 02 March 1929
• Docket Number: 6424.
• Parties: BAKER et al. v. CALLOWAY et al.
• Court: Georgia Supreme Court

147 S.E. 562

167 Ga. 908

BAKER et al. v. CALLOWAY et al.

No. 6424.

Supreme Court of Georgia

March 2, 1929

Syllabus by the Court.

In this case the plaintiffs timely filed exceptions pendente lite to the judgment of the trial court sustaining various and numerous special demurrers, whereby 30 paragraphs of the petition were stricken and the case so completely disemboweled that dismissal of the action was the necessary legal consequence. In the order to which exception was taken the court made several rulings as to the effect of instruments set forth in the petition upon which depended the plaintiffs' cause of action as pleaded, and exception to the correctness of these rulings was embraced in the exceptions pendente lite. The court also allowed amendment to three paragraphs of the petition and amendment to the petition generally, if made within 10 days. The time allowed for amendment was by order subsequently extended until a time some weeks later; and on July 25, 1927, the same day that exceptions pendente lite were filed, the plaintiffs filed their amendment, which was allowed subject to demurrer. Thereafter, on October 21, 1927, a hearing was had upon demurrers to the proposed amendment, and the demurrers were sustained. The plaintiffs could have filed a direct bill of exceptions to the order of June 7, but, by insisting upon the amendments and invoking the judgment of the trial court as to their merits, the plaintiffs waived the right to insist upon the exceptions pendente lite. In consequence they were bound by the ruling of the court to which exception had been taken in the exceptions pendente lite, as well as the ruling upon demurrer addressed to specific paragraphs of the petition.

In view of the principal just announced, there was primarily nothing before the court at the hearing on October 21, except the question as to whether the amendment offered was sufficient to withstand the special demurrers which had been filed by those defendants remaining in consequence of the court striking the other defendants, to which no exception is taken.

The court did not err in striking the amendment in response to demurrers presented by the defendants, and in thereafter dismissing the petition.

Error from Superior Court, Fulton County; John D. Humphries, Judge.

Petition by W. Q. Baker and others against E. C. Calloway and others. Judgment for defendants, and plaintiffs bring error. Affirmed.

Petition by minority stockholders to enjoin action by defendants as stockholders and directors and recover damages for breach of contract held properly dismissed.

W. Q Baker and other named persons, alleging themselves to be stockholders in the Grape Dew Company of America, instituted this petition "for themselves and others similarly situated, and for and on behalf of the Grape Dew Company of America and in its name and stead." The petition named E. C. Calloway, W. O. Wilson, T. L. Slappey A. D. Lewis, Edgar C. Jones, Bottled Beverages, Inc. Finance, Inc., and Brandimist Company, a Delaware corporation, with offices and agents in the county of Fulton, as defendants. According to the allegations of the petition, the Grape Dew Company of America was organized under a charter granted by the superior court of Fulton county, and thereafter it acquired the right to manufacture, bottle, and sell Grape Dew and other drinks based upon formulæ formerly owned by a partnership composed of Baker, Slappey, Jones, Harris, and Collins, whose rights and franchises in and to the exclusive manufacture, bottling, and sale of Brandimist made from a formula then owned by A. D. Lewis for Atlanta, and a radius of 50 miles was acquired by said Grape Dew Company upon terms stated in the petition. The contracts under which the rights and franchises for the manufacture, etc., of Brandimist were acquired are attached to the petition as Exhibits A and B. It is alleged that all of the rights and franchises in and to Grape Dew and other drinks than Brandimist were transferred and assigned with the consent of A. D. Lewis to the partnership above referred to, and by this partnership to the Grape Dew Company in consideration of $35,000 of its common stock when organized, and issued as fully paid and nonassessable stock. Thereafter $5,000 of preferred stock was issued, which was subsequently converted into common stock, making in all an issue of $40,000 common stock, or 4,000 shares of the par value of $10 per share. This was the stock on July 24, 1925, when at a stockholders' meeting held for that purpose the defendant Calloway submitted a proposition to develop, finance, and exploit the Grape Dew Company; and pursuant to the terms of that proposition, and with a view to compliance therewith in the event of the consummation of a contract to that effect, the stockholders authorized an increase of the common stock by the issuance of 6,000 shares at $10 per share, and authorized an acceptance of the proposition of Calloway, with one additional term to which reference will later be made. On July 27, 1925, the proposition submitted by Calloway was formally accepted, and the officers of the company were authorized to execute a contract.

This contract was as follows: "This contract made and entered into by and between E. C. Calloway of the first part, and Grape Dew Company of America, Inc. of the second part, witnesseth, that, for and in consideration of the sum of $1 cash in hand paid each to the other, said parties hereby agree and contract as follows: That whereas on 7/20/25 party of the first part made a tentative proposition to party of the second part, as follows: 'I submit to you the following tentative offer of a proposition for promotion of the Grape Dew Company: 1st. I will place to the credit of the Grape Dew Company of America a loan of $2,000 at 8% interest to be covered by company note, date of payment to be determined later. 2nd. This is based on the idea that the liabilities of the company will not exceed $804.93 at the time of closing said trade. 3d. I realize that it will require capital to put the Grape Dew Company on a good paying basis; and while I do not care to obligate myself to put up an unlimited amount of capital, I will agree to put up a reasonable amount, based on the amount of business to be secured, that is on a profitable basis; and while I am ready to take reasonable risks, I do not want to break myself and do not want the company to fail, and therefore I would have to be allowed to be the final judge as to the amount of money I put into the company. 4th. The $5,000 in preferred stock to be converted into common stock, making all the stock in said company the same kind. 5th. My ideas being to put salesmen or a salesman on the road to make contracts with bottling plants, and I to furnish the capital to fill such orders if contracts are made on a profitable basis. 6th. For my services for financing said company you to issue to me $60,000 of the capital common stock of said company at par value of $10 per share. Yours very truly, E. C. Calloway.' And whereas, on July 24, 1925, party of the second part in regular annual stockholders meeting, after the above proposition was submitted to the meeting, and, after full discussion was had on the matter, the following resolutions were offered and unanimously carried: 'Motion was here made by C. Hines and seconded by W. Q. Baker that the company accept Mr. Calloway's tentative offer, and that the board of directors be authorized to draw up a suitable contract with Mr. Calloway, which motion was voted on and carried unanimously.' In addition to the terms set forth above, it was agreed between the directors of the company and Calloway as follows: '3d. Both parties hereto hereby ratify the action set forth, and further agree as hereinafter set forth. 4th. And whereas party of the first part does further agree that if within twelve months from this date he desires to sever his connection with party of the second part, he will, in that event, turn back to party of the second part fifty one per cent. of said stock, or 5100 shares, retaining 900 shares of stock of the par value of $10 per share and the party of the second part agreeing at the same time to reimburse party of the first part for such loans as have been advanced, with 8% interest. 5th. That date of payment covering loans made by party of the first part to party of the second part to be based on what will be a reasonable time for the payment of such loans."'

It is alleged that Calloway undertook to advance sufficient capital to finance and put the Grape Dew Company upon a profitable basis; and in consideration of said services to be rendered in financing the company as provided in the contract, he was to receive 6,000 shares of the common stock of the company with the provision that if he withdrew therefrom within one year he would be entitled to only 900 shares and be under obligation to return 5,100 shares of the stock; that at the time of the making of the contract 6,000 shares of the capital stock were actually issued to Calloway; that the issuance of this 6,000 shares of stock was utterly without consideration; that there was an implied condition in accordance with the terms of the contract that this stock was to be treated as treasury stock or as unissued, and not treated as actually issued until determination after a term of twelve months. In paragraph 12 it is alleged that notwithstanding the contract and representations made by Calloway to the two meetings of the stockholders, as an inducement to the execution of said contract, that he would advance sufficient money to put Grape Dew upon a paying basis, and would make a national proposition out of the bottling, selling, and distribution thereof, he secured the removal of the bottling and...